Prices slide
Need to know
- FY22 iron ore shipment guidance unchanged at 320-335mt (151.4mt shipped 1H22, 322mt FY21)
- First ore from Gudai-Darri helped offset wet weather and labour shortages in Pilbara
- Copper +9% on 2Q21 on higher grades and volumes at Kennecott and Escondida
- Aluminium -10% on reduced capacity at Kitimat on restart after last year’s strike
Investment Implications
Iron Ore production is on target for FY22 guidance range. Achieved iron ore price in 1H22 of US$120.5/dmt, compared to the Platts Index price of US$128.2/dmt. Downward pressure on the seaborne iron ore price is due to extended COVID-19 restrictions impacting China’s downstream steel demand. Unit cost guidance for FY22f is US$19.50- 21.00/t based on a AUD:USD of 0.71 (was 0.75), indicating FX is providing some relief to rising operating costs.
Aluminium FY22f production guidance reduced slightly to 3.0-3.1Mt. The strike from last July at Kitimat (Canada) has meant a slower restart of production. The average aluminium LME price fell 32% during the quarter to US$2,397/t after record prices were achieved in 1Q22. The copper price has also dropped 20% to US$3.74/lb from record levels in 1Q22.
The global market demand for commodities is waning in the near term as recession fears emerge. This is dragging on commodity prices, but the long-term structural demand for decarbonisation will support demand.
Figure 1: Achieved average commodity prices
Source: RIO
This commentary reflects our initial view. For detailed reports for companies under Sandstone Insights coverage, see our latest research notes for our investment view and specific risks associated with investing in these companies.
Stock overview
Share price
Company overview
Rio Tinto is a global mining company with operations in iron ore, copper, aluminium and minerals.
Disclaimers and Disclosures
Issuer
The information and opinions contained within Sandstone Insights Research were prepared by MST Financial Services Pty Ltd (ABN 54 617 475 180, AFSL 500557) ("MST").
Reliance
Whilst MST make every effort to use reliable, comprehensive information in the construction of its reports, MST make no representation, warranty or undertaking of the accuracy, timeliness or completeness of information in this report. Save for any statutory liability that cannot be excluded, MST and MST employees, representative and agents shall not be liable (whether in negligence or otherwise) for any error or inaccuracy in, or omission from, this advice or any resulting loss suffered by the recipient or any other person.
General Advice
Any advice contained within Sandstone Insights Research is general advice only and has been prepared without taking into account any person’s objectives, financial situation or needs. Any person, before acting on any advice contained within Sandstone Insights Research, should first consider consulting with a financial adviser to assess whether that advice is appropriate for their objectives, financial situation and needs.
General Disclosures
This report should be read in conjunction with MST Disclaimers and Disclosures and is published in accordance with MST Conflict Management Policy which are available on the MST website: https://www.sandstoneinsights.com.au.
Currency of Research
The recommendations made in a Sandstone Insights Research report are current as of the publication date. If you are reading a report materially after publication, it is likely that circumstances will have changed and at least some aspects of the analysis may no longer hold.
Access and Use
Any access to or use of Sandstone Insights Research is subject to the Terms of Use. By accessing or using Sandstone Insights Research you hereby agree to be bound by our Terms and Conditions and hereby liable for any monies due in payment of accessing this service. In addition you consent to us collecting and using your personal data (including cookies) in accordance with MST Privacy Policy, including for the purpose of a) setting your preferences and b) collecting readership data so MST may deliver an improved and personalised service to you. If you do not agree to MST Terms of Use and/or if you do not wish to consent to MST use of your personal data, please do not access this service.
Equities Research Methodology
Please click here for information about MST equities research methodology.
Related Reports
Now for the hard part
FY23 result. An extraordinary year for PLS in terms of the cash and earnings generated by the combination of higher production and elevated commodity prices.
Milling about
A record year of cash earnings has prompted the Board to extend the buyback and lift the final dividend for shareholders.
Backyard cookup
Mineral Resources has effectively swapped out the downstream China risk to develop lithium battery chemicals with a more domestic pathway forward. This is likely to take longer and perhaps may rely on government support.