Rio Tinto Group reported a drop in first-half profit and will pay a smaller dividend in the latest sign that a bonanza era of record returns across the mining industry is nearing an end.
A year ago, the world’s biggest producers were enjoying super-sized returns, as key commodities like iron ore and copper surged to unprecedented levels. Now, profit margins are being squeezed as recessionary worries drive prices lower while costs across the sector are ballooning.
Rio reported underlying earnings of US$8.6 billion in the first half, down from a record US$12.2 billion last year. It will pay a US$4.3 billion dividend compared with US$9.1 billion it returned in the same period in 2021.
For now, profitability remains strong by historical standards, and the biggest miners continue to pay out large amounts of cash to shareholders. However, producers including Rio and larger rival BHP Group have been warning about the threat of slowing global growth and surging energy prices.
Rio Tinto is the biggest iron ore producer and is facing growing pressure in its key business as the crisis engulfing China’s property sector and a wider global slowdown drives down prices. Goldman Sachs Group Inc. forecast Tuesday that the market would flip to a surplus in the second half of the year and said prices could fall as low as US$70 a ton.
