Battery minerals, Commodities, Finance, Iron ore, News

High inflation tempers Rio optimism

Rio

The economic world is in a state of flux amid the Russia-Ukraine war and ongoing COVID-19 pandemic.

Commodity prices are largely higher across the board but inflation is also on the rise, increasing costs and dampening gains.

Rio Tinto is not oblivious to the market volatility. In its quarterly report, the company conceded to a “challenging first quarter”, with its Pilbara iron ore production and shipments down compared to corresponding periods.

The iron ore price has been trending higher to commence 2022, however that doesn’t necessarily correlate to market optimism.

“Iron ore prices have been volatile, with the Platts 62 per cent Fe index up 33 per cent at the end of the first quarter ($US158/dry metric tonne),” Rio said in its quarterly.

“Since late February, supply concerns due to the war in Ukraine has outweighed muted demand growth and a crackdown on speculative trading behaviour in China.

“China’s economy is getting a boost with infrastructure spending, but COVID-19 lockdowns pose downside risks to near-term construction activity.”

In the past few weeks, nearly 400 million people across China have found themselves in some sort of lockdown due to a spike in COVID-19 cases.

China is operating on a “zero-COVID” strategy which means lockdowns could be a consistent theme in the near-term. This will impact steel mills and upset China’s growth aspirations in some shape or form.

Eager to participate in the global energy transition, Rio has made several moves in recent months to ensure it has a piece of the battery metal pie.

Rio’s Oyu Tolgoi copper-gold mine in Mongolia commenced underground operations in late January, while the company completed its acquisition of the Rincon lithium project in Argentina in late March.

The major miner holds optimism for copper and lithium futures.

“Copper has not experienced a price rally to the extent seen in other base metals, although the price was up 7 per cent at the end of the first quarter ($US4.69/lb),” Rio said.

“The global market (for copper) continues to be tight, with exchange stocks near 16-year lows, and is still susceptible to supply disruptions. However, rising global production later in 2022 should help to offset disruptions.

“Prices for key battery metals have continued to increase as strong demand outpaces supply, amidst low spodumene feedstocks.

“Lithium carbonate prices have more than doubled in the first quarter and seen a six-fold increase year on year. Nevertheless, mine supply growth should pick up due to the ramp up of idled mine capacity and new projects coming online, especially in Australia.”

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