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(Reuters) -Rio Tinto reported a 29% drop in first-half profit on Wednesday and more than halved its dividend, as the global miner was hurt by weaker iron ore prices due to cooling demand from top consumer China, higher costs and labour shortages.
Iron ore prices have come under increased pressure in recent months due to persistent demand worries from top steel producer China, with the country’s zero-COVID policy curtailing economic activity and weighing on ferrous markets.
Mining companies around the world have also been struggling due to a pandemic-related shortage of skilled workers and surging inflation, at a time when iron ore prices have come off their 2021 highs and are expected to remain subdued.
“The market environment has become more challenging at the end of the period,” Rio Tinto (NYSE:RIO) Chief Executive Jakob Stausholm said. (https://refini.tv/3OEkhaO)
“Our operations and growth projects continue to be impacted by the high unplanned absences, tight labour markets, rising input costs and supply chain disruptions,” the company said.
China’s plan to centralise iron ore purchases has also cast doubt on the prospects of global mining giants.
Rio Tinto, one of the world’s top iron ore producers, posted an underlying profit of $8.63 billion for the six months ended June 30, compared with a record $12.17 billion a year earlier and a company-compiled estimate of $8.37 billion.
The company more than halved its interim dividend to $2.67 per share from $5.61 per share a year earlier. The dividend for the first half equates to $4.3 billion and was still Rio’s second-highest interim payout ever.
The company also cut its capital investment forecast for 2022 by $500 million to $7.5 billion.
