Rio Tinto First-Half Earnings, Dividend Fall on Weaker Commodity Prices -- Commodities Roundup

MARKET MOVEMENTS:

--Brent crude declines 1% to $82.45 a barrel.

--European benchmark natural gas fell 3.5% to EUR31.50 a megawatt-hour.

--Gold futures rose 0.4% to $1,970.90 a troy ounce.

--LME three-month copper futures declined 0.8% to $8,590 a metric ton.

--Wheat futures fell 2.1% to $7.44 bushel.

TOP STORY:

Rio Tinto First-Half Earnings, Dividend Fall on Weaker Commodity Prices

Mining giant Rio Tinto reported a 43% drop in first-half net profit and pared its payout to shareholders, reflecting a fall in commodity prices as China's economic recovery faltered.

The world's second-biggest miner by market value on Wednesday said it made a net profit of $5.12 billion in the six months through June, down from $8.94 billion a year earlier.

Underlying earnings totaled $5.72 billion, compared with $8.66 billion in the first half of 2022, as prices of aluminum, copper and, most importantly, iron ore--which accounts for the majority of Rio Tinto's profits--declined.

It is the company's lowest first-half underlying earnings since 2020, after which commodity prices surged on government stimulus programs in response to the Covid-19 pandemic. Analysts had expected first-half underlying earnings of roughly $5.85 billion, according to 11 forecasts compiled by Visible Alpha.

OTHER STORIES:

UK Energy Regulator Introduces Minimum Capital Requirement for Suppliers

The U.K. energy regulator on Wednesday introduced a minimum capital requirement for domestic suppliers, allowing it to direct suppliers to ringfence customer credit balances.

The Office of Gas and Electricity Markets, or Ofgem, said it has introduced requirements in the form of a minimum capital floor and a capital target as part of a wider package of measures to improve the energy sector.

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Anglo American's De Beers Diamond Sales Fell in Line With Seasonal Trends

Anglo American said Wednesday that rough-diamond sales by its majority-owned De Beers Group fell 10% in the sixth cycle compared with the earlier cycle, in line with seasonal trends.

The FTSE 100 diversified mining company said De Beers sold $410 million of diamonds in the sixth sales cycle of the year, compared with $456 million in the fifth cycle and $638 million in the sixth cycle of 2022. There are 10 sales cycles each year.

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U.S. Allies in Asia Snub Alaskan Natural Gas

Japan and South Korea have rebuffed U.S. overtures about joining a proposed $44 billion Alaska natural-gas project that would be one of the biggest energy investments in American history.

The snubs have put a roadblock in front of a liquefied natural gas project that has made strides recently. Washington says exporting gas from Alaska would strengthen global security by giving Asian nations an alternative to Russian gas.

The plan, called Alaska LNG, features an 807-mile pipeline that would carry natural gas from fields north of the Arctic Circle to the southern part of the state, from which it would be shipped primarily to Japan, South Korea and other countries in Asia.

But people familiar with the plans of several top prospective buyers in Japan and South Korea said the companies expressed they weren't interested in investing in the project or signing contracts to purchase its gas, and energy officials also have given Alaska the cold shoulder.

Potential buyers aren't confident in the project's timeline, according to officials at companies and in the Japanese government. They believe that Asian countries will have other sources of stable natural-gas supplies by 2030, although the gas market is volatile and competing projects also carry risks.

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Equinor Maintains Dividends Despite Second-Quarter Earnings Drop

Equinor on Wednesday maintained its quarterly and extraordinary dividends, despite a sharp drop in second-quarter earnings as gas prices fell from the extraordinary levels seen last year.

The Norwegian energy major, which is 67%-owned by the Norwegian state, said adjusted earnings--its preferred measure--fell to $7.54 billion from $17.57 billion, against the $7.64 billion expected in a company-compiled consensus.

MARKET TALKS:

Miners Lose Ground After Rio Tinto's 1H Earnings Drop

0945 GMT - Mining stocks fall after Rio Tinto reported lower first-half underlying earnings, though it described the 1H results as robust given softer market conditions. The numbers matched expectations in terms of earnings, though the company's interim dividend was modestly below consensus expectations, Citigroup says. "We don't expect meaningful changes to 2023 consensus earnings given in-line results," Citi analysts say in a note. Rio drops 1.9%, while Glencore, Anglo American, Antofagasta and Fresnillo are also among the biggest top-flight losers despite higher gold and silver prices. ([e-mail])

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Rhine Water Levels Drop, Threatening Disruption to Germany's Economy

0924 GMT - Water levels on the Rhine River are dropping, threatening another summer of potential disruption on the waterway key to Germany's commodity flows and its economy. Water levels at Kaub, a key checkpoint between Koblenz and Mainz fell to 90 centimeters on Monday, their lowest level so far this year, according to data from Germany's Federal Institute of Hydrology. Rain in recent days has raised those levels but fears that another dry summer could make navigating the waterway challenging have been revived. Dry weather last summer saw water levels drop to around 30cm at times, all but closing the waterway to barges that ferry industrial goods, coal and diesel, and crimping Germany's economic growth. ([e-mail])

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Tide May be About to Turn for Rio Tinto

0819 GMT - Rio Tinto, whose 1H FY result was weighed by a weaker metals markets, may soon see commodity prices turn in its favor, says Quilter Cheviot analyst Jamie Maddock. "While the earnings performance of Rio Tinto has been very modestly weaker than anticipated, it's crucial to highlight the significant potential for an uplift in earnings in the near future," Maddock says in emailed remarks. The mining titan makes a lot of its money from steel ingredient iron ore, a market that may be strengthened by efforts to stabilize China's ailing property sector. "Therefore, despite the current challenges, there is a promising possibility for improved profitability on the horizon," Maddock says. ([e-mail]; @RhiannonHoyle)

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Base Metals Weaken Ahead of Fed Meeting

0800 GMT - Base metals weaken while gold rises ahead of the Federal Reserve's call on interest rates. Copper prices on the LME decline 1% to $8,576.50 a metric ton, aluminum falls 0.8% to $2,219.50 a ton and zinc declines 0.9% to $2,470 a ton. In contrast, gold prices gain 0.3% ahead of the conclusion of the meeting at which most analysts expect the Fed to raise interest rates by a quarter percentage point. "Since a hike today is almost fully priced in, the bigger question for markets will be if the statement and the press conference signal anything about the likelihood of further rate hikes ahead," Deutsche Bank says in a note. ([e-mail])

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Palm Oil Edges Lower Amid Mixed Signals

1025 GMT - Palm oil prices ended slightly lower in Asia, erasing early gains as the commodity stayed range-bound amid mixed signals. Analysts say the edible oil could enjoy some support in the near term given supply uncertainties triggered by weather conditions and geopolitical risks between Russia and Ukraine. But there are concerns on the fundamentals, given the dim demand outlook amid a global economic slowdown, they say. The Bursa Malaysia Derivatives contract for October delivery fell MYR3 to MYR4,063 a ton. ([e-mail])

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(END) Dow Jones Newswires

07-26-23 0703ET