The major Australian mining stocks fell on Wednesday, after Jakob Stausholm, CEO of Rio Tinto, warned that copper prices will be under pressure from high inflation and disruptions to supply chains.
BHP Group Ltd (ASX BHP and Rio Tinto Ltd, the largest miners in the country respectively, saw their shares drop by 2.6% and 3.1%, respectively. Despite being more exposed to copper, BHP’s copper sales are higher.
Newcrest Mining (ASX NCM) was smaller than OZ Minerals Ltd. (ASX OZL). Both dropped 2.9% and 1.1%, respectively.
Related: Rio Tinto and China Baowu will spend $2 billion on an Australian iron ore project.
Stausholm spoke to Asian Trade to say that the COVID-19 pandemic’s aftereffects were still disrupting global supply chains and that an inflation trending at 30- to 40-year highs would be a problem.
Stausholm’s remarks come amid a sharp decline in copper price this past year due to COVID-related disruptions affecting China, the largest copper consumer in the world. High energy prices and inflation have also affected industrial activity in Europe, the United States and elsewhere.
Rio Tinto, world’s second largest miner, saw a decline in profits in the first half of 2018. This was due to weakening Chinese demand. A $3.3B buyout by Canadian partner Turquoise Hill Resources (TSX TRQ) was also reached by the company. This gives it direct ownership over the huge Oyu Tolgoi copper mine project in Mongolia.
Stausholm stated that he believes China will see growth eventually, as it doesn’t face the same inflationary pressures like other countries. He expressed confidence in copper’s long term prospects driven by a shift to low-carbon energies.
A strike at Chile’s Escondida copper mine, which is the world’s largest, may provide some support for copper prices in the short term. BHP recently approved a vote by the workers union at the mine to stop work from this month.
Related: Rio Tinto cuts dividends as iron ore prices slump.
