Rio Tinto profits sink as iron ore prices ease and China’s economy stutters
Rio Tinto has reported its lowest first-half year profits since the pandemic as falling iron ore prices dragged down earnings.
The Anglo-Australian miner has reported underlying earnings of £4.42bn ($5.7bn) for the first six months of the year, well below the £6.69bn ($8.63bn) figure posted 12 months ago.
It has now slashed its dividend to $1.77 per share, a sharp reduction on last year’s offering of $2.67 per share for investors.
Iron ore accounts for roughly 70 per cent of Rio Tinto’s profits, which used across the world as a key steel-making ingredient.
However, Rio Tinto has suffered from lower commodity prices during the first six months of trading this year amid slowing global demand and a stuttering revival in China’s economy – the company’s key market.
Average realised prices for iron ore from its Western Australian mine in Pilbata slipped to $76.38 ($98.60) per wet metric ton (wmt) in the first half of the year, 11.1 per cent below last year.
This offset a seven per cent rise in shipments of the steel-making ingredient to 161.7m metric tons.
The world’s largest iron ore producer has also raised issues over a shortage of skilled workers in a tight labour market, alongside supply-chain problems.
“Our operations and growth projects continue to be impacted by high unplanned absences, tight labour markets, rising input costs and supply chain disruptions,” the company said in a statement.
Looking ahead, Rio Tinto was optimistic that China’s stimulus proposals will boost economic activity after its economy struggled with an uneven recovery from the pandemic, raising iron ore demand.
Rio Tinto chief executive Jakob Stausholm said: “We have a clear pathway to building an even stronger Rio and continue to gain momentum in our strategy to set the business up for long-term success. We are making good progress on pursuing our four objectives as we build further momentum in our Pilbara iron ore business, mindful that we need to raise our game across many of our other operations”.
The company’s four objectives are to be the best operator, excel in development, have impeccable ESG credentials, and act within a social licence.
However, Rio Tinto has been scrambling to restore its reputation since it destroyed two ancient rock shelters in the Juukan Gorge, Western Australia, over three years ago.
The sacred Aboriginal cave system, had shown signs of continued human occupation for more than 46,000 years – before it was blown up in exchange for £75m of iron ore.
A new leadership team was brought in after a severe backlash from shareholders, consumers and politicians, and the company commissioned an internal workplace review into its business culture.
It has since made commitments to implement dozens of recommendations to improve its workplace environment, and pledged to create a foundation for cultural projects in the Pilbara region where the cave system formerly stood.