Rio Tinto warns over inflation, China lockdowns and war in Ukraine

Rio Tinto issued a stark warning about rising inflation, Covid lockdowns in China and the war in Ukraine as iron ore sales dived.

The mining giant shipped 71.5million tonnes of the key steelmaking ingredient in the first three months of the year – 15 per cent less than in the previous three months and 8 per cent down on the same period in 2021.

At the same time, production of virtually all of its major metals slid. Shares in the group Rio fell 4.7 per cent or 292p to 5850p, making it the biggest faller on the FTSE 100.

The company was hit by labour shortages and disruptions to its supply chain. But it also raised the alarm about new Covid lockdowns in China, which could hit demand for iron ore if construction and the economy slowed.

The war in Ukraine has added to supply concerns and made commodity prices volatile, while sharp rises in inflation have increased the risk of a global economic slowdown.

Chief executive Jakob Stausholm said the first quarter was ‘challenging as expected’. 

But the company stuck to its full-year forecasts and said it expects the iron ore business to improve later in the year when it opens a new mine. 

It comes after the company posted record profits of £23billion and paid a £12.6billion dividend in 2021.

RBC Capital Markets analyst Tyler Broda said: ‘The continuing poor operations leave Rio with plenty of work to do.

‘The operational environment should start to improve.’

Rio became the first major mining company to announce it was cutting all ties with Russian businesses, and in the first quarter it resolved issues with a huge copper mine in Mongolia.

Setbacks have dogged several of its major projects, complicating plans to focus the company on green metals ahead of the renewables revolution.

In January, the Serbian government pulled the plug on a £1.8billion lithium mine Rio was planning to build there.