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| Rio Tinto Iron Ore |
Profit Decline Highlights Vulnerability to Global Iron Ore Price Volatility
Global mining giant Rio Tinto posted its weakest earnings in five years, driven by falling iron ore prices and rising operating costs in Western Australia's Pilbara region. In the first half of 2025, underlying profit fell 16% year-on-year to $4.81 billion, below analyst forecasts. This sharp decline underscores how exposed miners remain to China’s slowing steel production and rising global supply.
Interim Dividend Slashed as Pilbara Costs Rise
As a result of weaker profits, Rio Tinto declared its lowest interim dividend since 2018—$1.48 per share, compared to $1.77 in 2024. Meanwhile, unit costs in the Pilbara rose to $24.3 per tonne, up from $23.2, due to lower supply volumes and cyclone-related disruptions. Nevertheless, Rio Tinto maintained its full-year cost forecast at $23–24.5 per tonne, reflecting confidence in cost discipline despite regional challenges.
Copper and Lithium Offer Strategic Growth Path
However, Rio Tinto remains strategically optimistic. Outgoing CEO Jakob Stausholm highlighted growth prospects in copper and lithium, bolstered by demand from battery systems and data center infrastructure. These sectors align with long-term energy transition trends. Meanwhile, Morgan Stanley forecasts iron ore prices may recover to $100/tonne by year-end, offering potential upside for Rio’s core commodity business.
ScrapInsight Commentary
Rio Tinto's profit drop reveals ongoing fragility in bulk commodity pricing, particularly tied to Chinese steel output. Rising Pilbara costs may squeeze margins if prices stay soft. However, copper and lithium investments could mitigate volatility and align Rio with the circular economy and decarbonization goals.
