Miners Rio Tinto and Antofagasta miss out on FTSE 100 rally amid China slowdown concerns
Rio Tinto and Antofagasta miners miss out on FTSE 100 rally amid concerns over China’s growth slowdown
- Rio Tinto expects to ship nearly 335 million tons of iron ore this year
- The Anglo-Australian company is heavily dependent on iron ore exports to China
- Both Rio Tinto and Antofagasta cut their annual copper production forecasts
Mining giants Rio Tinto and Antofagasta missed Thursday’s rally in London-listed stocks as concerns over a slowdown in China’s economy left the sector in the red.
The FTSE 100 was up more than 1.5 percent by midday, based on data from the Office for National Statistics, which showed inflation slowing and expectations for interest rate spikes lowering.
Almost the entire blue-chip index traded higher, with heavyweight miners being one of the few exceptions.
Outlook: Anglo-Australian mining giant Rio Tinto expects to ship nearly 335 million tonnes of iron ore from its Pilbara operations in Western Australia this year
This is despite Rio Tinto telling investors it expects annual levels of iron ore shipments to be at the high end of forecasts, despite concerns about the global economy.
The Anglo-Australian mining company expects to ship nearly 335 million tonnes of iron ore from its Pilbara operations in Western Australia this year.
Shipment volumes fell slightly in the second quarter due to a train derailment and maintenance at the group’s Dampier operations, but were still up 7 percent to 161.7 tonnes in the first half of 2023.
Rio Tinto is the world’s largest producer of iron ore and relies heavily on exporting the raw material to China, where it is used in steelmaking, commercial and residential buildings and other critical infrastructure projects.
China’s economy has slowed since the boom triggered by the end of lockdown restrictions, but this has now hit a wall.
The world’s second-largest economy is facing shrinking exports, falling prices, fewer new construction projects and worryingly high youth unemployment.
Rio Tinto said worse steel demand and factory activity in the second quarter resulted in a 12 percent drop in iron ore prices.
Even as China’s central bank cut lending rates several times, the company warned that consumers remained tight with their spending habits.
As a result of this weak economic sentiment, Rio Tinto Shares have remained flat this year, having received a boost towards the end of 2022 as China eased Covid-related rules. They were 0.25 percent lower at £50.97 on Wednesday morning.
Rio Tinto further warned that a recession in the US is likely given the Federal Reserve’s successive rate hikes, while the eurozone is hampered by high inflation and weak production levels.
And while the FTSE 100 group’s outlook for iron ore production is optimistic, it has downgraded its full-year forecast for alumina and refined copper.
Jakob Stausholm, general manager of Rio Tinto, said: “The production cuts during the quarter emphasize that we have much more to do elsewhere.”
Fellow London-listed miner Antofagasta revealed on Wednesday that it produced 295,500 tonnes of copper in the first six months of 2023, up 10 percent year-on-year.
But like Rio Tinto, the company lowered its annual production guidelines for the material to between 640,000 and 670,000 tons.
The Chile-headquartered conglomerate blamed reduced water availability and delays in construction of the desalination plant and concentrator expansion at the Los Pelambres mine.
Antofagasta Shares were 1.5 percent lower at £14.85 on Wednesday morning.