Rio Tinto’s profit for 2022 goes down because the slowdown in China hurts iron ore margins.
Rio Tinto Ltd. (ASX:RIO), an Anglo-Australian mining company, reported a big drop in its profit for 2022 on Wednesday. This was mostly due to a drop in the margins on its iron ore production, which was caused by low demand in China.
The miner said in a statement that its profit for the year ending on December 31 went down from $21.09 billion the year before to $12.42 billion.The total amount of money made from sales also went down, from $64.49 billion to $55.55 billion.
Rio Tinto announced a dividend of $4.92 per share for the whole year. This is less than half of the record-high dividend of $10.40 per share in 2021.
Iron ore prices dropped sharply in 2022, especially in the second half of the year as China’s economy slowed down even more. Rio Tinto, which is the biggest iron ore producer in the world, sold less iron ore at lower prices because of this. Its core earnings from iron ore were 33% lower than the year before.
Aluminum and copper sales also brought in less money, down 16% and 40%, respectively, because demand fell around the world. Most of the world’s major economies saw their economies slow down sharply in 2022 because of rising interest rates and inflation.
Rio Tinto sent out the same amount of iron ore as before, 322 million metric tons. But they were at the bottom of the miner’s range.
Still, the miner said it will keep putting money into its Pilbara and Mongolia projects to make them bigger.
China’s economy is slowing down, which is putting a lot of pressure on global commodity markets. This is because a series of COVID-related problems have made the country less interested in importing metals and energy.
Even though most anti-COVID restrictions have been lifted, the economic data that has been released so far shows a mixed picture of recovery, especially in the manufacturing and real estate sectors.
The world’s largest miner, BHP Group Ltd (ASX:BHP), which is based in Australia and competes with Rio Tinto, also saw a big drop in earnings for the last half of 2022. This was due to a slowdown in China. But the company said that a strong rise in commodity demand would happen this year because China was getting better.