10 months ago • 2 mins
Mining giant Rio Tinto posted some dry-as-dust results on Wednesday, but the firm’s outlook predicted an incoming flood.
What does this mean?
2022 was a wild ride for metals, with dizzying early highs followed by a debilitating slump in the second half of the year. And China’s desperate attempts to contain Covid didn’t help matters, choking activity in the world’s second-biggest economy and dealing a crushing blow to the price of iron ore – a key material in steel production. Rio Tinto, the world’s top iron ore producer, certainly felt the heat: lofty labor and material costs ate into the miner’s bottom line just as prices plummeted, and profit for the full year nosedived 38% from 2021. But never fear: Rio Tinto’s “quietly confident” for 2023, especially now that China has got back to business. Still, that outlook was cold comfort for investors when the world’s second-biggest miner slashed its annual dividend by 50%, and they sent its stock tumbling.
Why should I care?
The bigger picture: Steel yourself.
For Rio to see the glory days return, China’s property sector – a key end-user of its iron ore in the form of steel – will need to get back in shape. And it looks like that just might happen: the Chinese government recently announced a pilot program allowing investment funds to operate in the market, a move that could help revive stalled projects in the sector, and one of a raft of efforts intended to give the sector a much-needed jumpstart.
Zooming out: Green gold mine.
Rio gave the EV world something to toot its horn about this week: a new green agreement with BMW. The German carmaker's looking to reduce its emissions and Rio's going to help out, supplying the firm with aluminum produced using hydroelectric power. For BMW, that means taking a chunk out of its carbon footprint – and for Rio, it suggests that eco deals could prove plentiful down the line.
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