Rio Tinto profit dives as weaker iron ore prices bite

Rio Tinto, the nation’s largest iron ore miner, says it has grown increasingly confident that China will be a stabilising force in demand for the key steel-making material iron ore in 2023 after COVID-19 curbs pummeled commodity prices last year.

The Anglo-Australian mining giant on Wednesday reported a steep fall in full-year profit on the back of soaring inflation and softer prices for iron ore, its biggest cash earner, during 2022. It told shareholders its underlying profit had fallen 41 per cent across the 12 months to December 31 to $US12.4 billion ($18.1 billion).

The result follows a record full-year profit in 2021 which, at $US21.1 billion, was the largest in the company’s 150-year history.

Chief executive Jakob Stausholm said core earnings and free cash flow for the year had remained strong last year, “despite challenging market conditions”. Rio Tinto attributed the fall in profit to weaker commodity prices, the impact of higher energy and raw material prices on its operations, and higher inflation bumping up its operating costs.

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Rio Tinto’s profit result fell short of analysts’ forecasts, but the miner beat expectations on its dividend payout. Most analysts had forecast Rio to record an underlying profit of $US13.4 billion, and dividends totalling $US4.80 for the full year.

Rio Tinto said it would pay out $US8 billion in full-year dividends, equivalent to $US4.92 a share, the second-largest ordinary dividend in its history.

The price of iron ore, one of Australia’s most lucrative exports, fell from lofty levels throughout last year as strict COVID-19 lockdowns and a property market slowdown reduced steel demand in China, which is by far the world’s biggest consumer of iron ore.

Rio Tinto’s leadership has previously expressed caution that the reopening of China’s economy this year following the end of its long-running zero-COVID policy could raise the threat of “high volatility” in the months ahead because of the risk that a wave of coronavirus cases could disrupt supply chains and worsen labour shortages.