World of commodities a China/rest of world split, clearly shown by BHP and Rio’s results
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Launceston — It may be a bit of an oversimplification, but in the current situation of the global coronavirus pandemic, the world of commodities is effectively split between China and the rest.
Nowhere is this more clearly illustrated than in the results of top global miners BHP Group and Rio Tinto.
BHP, the world’s biggest miner with a broad portfolio of quality assets, missed analysts’ estimates in reporting a 4% drop in annual profits on August 18.
BHP reported underlying profit attributable from continuing operations for the year ended June 30 of $9.06bn — below estimates of $9.42bn, according to Refinitiv IBES data.
“With the exception of China, the world’s major economies will contract during the 2020 calendar year as a result of the Covid-19 pandemic,” CEO Mike Henry said in a statement.
Looking at the details of BHP’s results shows that the standout performer was iron ore, providing 64% of the earnings before interest, taxes, depreciation and amortisation (ebitda) for the world’s third-largest producer of the steelmaking ingredient.
China buys more than two-thirds of the global seaborne trade in iron ore, making it the major commodity most exposed to the Chinese economy.
It’s also worth noting that BHP’s return on capital employed was 56% for iron ore, but only 12% for metallurgical coal, 7% for copper and 6% for petroleum.
While China has been boosting imports of most major commodities as its economy recovers from the coronavirus shutdowns of the first quarter, it is iron ore that has been the biggest beneficiary.
Spot 62% iron ore for delivery to north China, as assessed by commodity price reporting agency Argus, rose to a six-and-a-half-year high of $128.20 a tonne on Wednesday. It is now up 62% from its low so far this year of $79.60 on March 23, and 41% from the end of 2019.
This makes iron ore the best performing major commodity, leaving behind even the market darling, gold, which had gained 27% from the end of 2019 to its close of $1,929.54/oz on Wednesday.
It’s therefore little surprise that Rio Tinto, which is poised to overtake Brazil’s Vale as the world’s top iron ore miner, performed so strongly it its first-half results, announced on July 29.
The Anglo-Australian miner reported underlying half-year earnings of $4.75bn, beating the analysts’ consensus forecast of $4.36bn.
Unsurprisingly, CEO Jean-Sébastien Jacques was talking up China’s V-shaped economic recovery.
“We believe that China ...
Nowhere is this more clearly illustrated than in the results of top global miners BHP Group and Rio Tinto.
BHP, the world’s biggest miner with a broad portfolio of quality assets, missed analysts’ estimates in reporting a 4% drop in annual profits on August 18.
BHP reported underlying profit attributable from continuing operations for the year ended June 30 of $9.06bn — below estimates of $9.42bn, according to Refinitiv IBES data.
“With the exception of China, the world’s major economies will contract during the 2020 calendar year as a result of the Covid-19 pandemic,” CEO Mike Henry said in a statement.
Looking at the details of BHP’s results shows that the standout performer was iron ore, providing 64% of the earnings before interest, taxes, depreciation and amortisation (ebitda) for the world’s third-largest producer of the steelmaking ingredient.
China buys more than two-thirds of the global seaborne trade in iron ore, making it the major commodity most exposed to the Chinese economy.
It’s also worth noting that BHP’s return on capital employed was 56% for iron ore, but only 12% for metallurgical coal, 7% for copper and 6% for petroleum.
While China has been boosting imports of most major commodities as its economy recovers from the coronavirus shutdowns of the first quarter, it is iron ore that has been the biggest beneficiary.
Spot 62% iron ore for delivery to north China, as assessed by commodity price reporting agency Argus, rose to a six-and-a-half-year high of $128.20 a tonne on Wednesday. It is now up 62% from its low so far this year of $79.60 on March 23, and 41% from the end of 2019.
This makes iron ore the best performing major commodity, leaving behind even the market darling, gold, which had gained 27% from the end of 2019 to its close of $1,929.54/oz on Wednesday.
It’s therefore little surprise that Rio Tinto, which is poised to overtake Brazil’s Vale as the world’s top iron ore miner, performed so strongly it its first-half results, announced on July 29.
The Anglo-Australian miner reported underlying half-year earnings of $4.75bn, beating the analysts’ consensus forecast of $4.36bn.
Unsurprisingly, CEO Jean-Sébastien Jacques was talking up China’s V-shaped economic recovery.
“We believe that China ...
