Rio Tinto has warned that labour shortages, muted Chinese demand, falling commodity costs and the specter of recession are elevating “considerable” headwinds, regardless of reporting a major enhance in iron ore manufacturing from its Australian mines within the June quarter.
The Anglo-Australian miner mentioned demand from its greatest market China had “troughed” in May due to Covid-19 lockdowns. While demand recovered in June, the corporate mentioned that “uncertainties remain given the potential for ongoing outbreaks”.
The market replace launched on Friday got here as China narrowly missed a second-quarter contraction within the three months to June after Covid outbreaks prompted harsh lockdowns in economically vital areas together with Shanghai and Beijing. The consequence was nicely beneath economist expectations of 1.2 per cent progress.
Rio Tinto, which is dual-listed in London and Australia, mentioned within the replace that “growing recession fears and a decline in consumer confidence” had pushed commodity costs down within the quarter. It cited Russia’s invasion of Ukraine as one other issue behind financial headwinds.
“Trade disruptions, food protectionism and the global focus on securing energy supplies continue to put pressure on supply chains, which will need to be significantly eased before inflationary pressures subside,” the corporate mentioned.
Rio produced 78.6mn tonnes of iron ore from its Pilbara operations in Western Australia within the three months to the tip of June and shipped 79.9mn tonnes. That was up 10 and 12 per cent, respectively, on the three months to March — a very weak quarter — and beat many analyst forecasts. Rio will launch its first-half monetary outcomes on July 27.
The miner’s share value was down 2 per cent on Friday afternoon. The shares of fellow iron ore miners BHP and Fortescue additionally fell. Analysts at Barrenjoey and Royal Bank of Canada predicted the consequence would immediate earnings forecasts to be downgraded.
Glyn Lawcock, head of sources analysis at Sydney-based funding financial institution Barrenjoey, mentioned Rio’s iron ore consequence was a “bright spot”. The firm additionally downgraded its aluminium manufacturing forecast and missed market expectation for copper manufacturing.
“If you go to the most import division right now, which is iron ore, the business had a very credible quarter,” he mentioned, including if the corporate may rapidly ramp up manufacturing on the Gudai-Darri mine, it will put them “on a stable footing”.
Lawcock mentioned he anticipated the iron ore value to dip beneath $100 a tonne over the following three months, down from $106 at market shut on Thursday.
Friday’s assertion contained no monetary outcomes and left iron ore cargo steerage unchanged for the half yr.
The outcomes compensated for weak first quarter manufacturing, when labour shortages attributable to Covid delayed the opening of the brand new Gudai-Darri mine to exchange falling manufacturing at its ageing iron ore mines. Rio mentioned the mine had produced its first iron ore in June and would attain full capability subsequent yr.
For the half yr, Rio mentioned shipments have been down 2 per cent on the corresponding half, which it blamed on expert labour provide constraints. Australia’s labour market is the tightest it has been since 1974, official figures revealed on Thursday, with an unemployment price of simply 3.5 per cent.
Rio mentioned a rising Covid outbreak in Australia was additionally guilty for “elevated levels of unplanned absences” at its Pilbara operation.
Source: www.ft.com