Global mining companies must overcome COVID-related labour shortages and soaring production costs if they are to meet annual production targets, analysts said after downbeat quarterly reports.
Source: Reuters
London-listed Anglo American AAL.L and Antofagasta ANTO.L are among those to have either lowered annual production targets or increased expected capital expenditure, laying part of the blame on the broad inflationary pressure coming from rocketing diesel prices.
As a result, analysts expect earnings to be driven lower this year and next.
RBC Capital Markets, for example, expects Anglo’s earnings before interest, taxes, depreciation, and amortisation (EBITDA) to fall by a fifth in 2022 and 12% in 2023.
The world’s largest miners BHP Group BHP.AX and Rio Tinto RIO.L, RIO.AX also fell short of estimates for their January to March iron ore output and warned on future production of the steel-making commodity.
The common denominator was pandemic-led border controls in Western Australia state for much of the quarter that led to a dearth of mine workers and train drivers, before COVID cases surged when the curbs were lifted.
Major iron ore producers sell mostly to the world’s biggest steelmaker and consumer China, but the country will continue to reduce its crude steel output this year to curb pollution, after cutting around 30 million tonnes of production in 2021.
China’s fresh COVID-19 lockdowns, an expected slowdown in global economic growth and the impact of Russia’s war in Ukraine are also potent threats, analysts said.
“Lower steel production could lead to inventories rising into seasonally stronger supply, which could pressure iron ore prices,” RBC said in a note.
For copper, used to make a wide range of products from wires and pipes to solar panels, wind turbines and electric vehicles, a period of slower global growth would also be a setback but is increasingly likely, analysts at Jefferies said.
“Rio has a long way to go to regain its mantle as one of the best global mining operators and industry steward,” said Peter O’Connor, a senior analyst at Shaw and Partners.
Rio Tinto quarterly iron ore shipmentshttps://tmsnrt.rs/3K3uP0R
BHP quarterly WA iron ore productionhttps://tmsnrt.rs/3L6O3DY
