Full story: https://grafa.com/insights/commodities-mining-giants-smacked-by-profit-slump-amid-downturn-380226
Major mining companies have reported disappointing financial results this week, reflecting the challenging market conditions and declining commodity prices that have plagued the sector.
The poor performance highlights the sector’s vulnerability to global economic fluctuations and shifts in demand.
BHP Group (ASX:BHP) reported a 23% decline in first-half profits, attributing the drop to weakened demand for iron ore amid China’s struggling economy, which led the company to reduce its interim dividend to its lowest level in eight years.
Iron ore woes
Iron ore producers have been hit particularly hard. Giants like Rio Tinto (ASX:RIO) and Fortescue (ASX:FMG) have also seen significant declines in revenue and earnings due to softer iron ore prices.
The downturn is largely attributed to weak demand from China’s struggling property sector and high port-side inventories.
Bank of America strategist Michael Widmer forecast that iron ore prices could potentially fall below $80 per tonne, a level that would put pressure on higher-cost producers.
At the time of writing, the price of iron ore was fetching about US$100 per tonne, down approximately 17% from prices seen in July 2024.
Lithium market struggles
The lithium sector has not been spared from the downturn.
Companies such as Mineral Resources (ASX:MIN) and IGO (ASX:IGO) have faced significant challenges due to the weak lithium price.
IGO has reported a loss of $782.1 million over the past six months, a stark reversal from a profit of $288.3 million a year earlier.
Its share price has plummeted from $7.06 a year ago to $4.50 in afternoon trading on Friday, representing a drop of 36.3% over the past 12 months.
Pilbara Minerals (ASX:PLS), another major lithium player, reported an 82% fall in statutory profit after tax to $220 million, reflecting the sharp slide in lithium prices.
Coal price collapse
Glencore, a diversified mining giant, has been a victim of a slump in coal prices.
The company reported a net loss attributable to shareholders of $1.6 billion, marking a significant decline from the net income of $4.3 billion recorded in 2023.
Its sharp decline was primarily due to lower average energy coal prices, which have impacted the company’s bottom line.
Additional challenges
Several mining companies have faced additional financial pressures with impairment charges contributing to substantial losses for some firms.
Transition costs, such as those incurred by Mineral Resources for moving some operations into care and maintenance, have further impacted profitability.
Meanwhile, global economic uncertainty, including concerns about China’s economic recovery and geopolitical tensions, has affected commodity demand and prices.
The poor results across the mining sector underscore its cyclical nature and sensitivity to global economic conditions.
As companies navigate these challenging times, many are implementing cost-cutting measures and reassessing their production strategies to weather the storm.
