Record metal prices put mining companies ahead of oil giants
Major oil producers, who for decades were the biggest earners in the natural resources industry, are being eclipsed by once-smaller mining peers who are making record profits from burning metals markets.
The mining windfall is the latest sign of a boom in iron ore, copper and other metals that is sending a wave of inflation through the global economy, raising the cost of everything from electrical wires to construction beams.
In the corporate world, the top five iron ore mining companies are on track to achieve combined net profits of $ 65 billion this year, according to estimates compiled by Bloomberg. That’s about 13% more than the top five international oil producers, overturning a decades-old hierarchy.
“It’s wild,” said Mark Hansen, CEO of London-based trading house Concord Resources Ltd. “The value has now shifted from energy to metals.”
The impressive mining profits come mainly from iron ore, the world’s second largest commodity after oil. The crucial steel ingredient is trading barely below $ 200 a tonne and on par with record prices a decade ago, when ravenous Chinese demand sparked what became the commodities supercycle. Australia’s largest mining companies can extract a tonne of iron ore from the ground for less than $ 20 a tonne.
Copper prices also climbed near their all-time highs, breaking the $ 10,000 per tonne mark for the first time in a decade. A basket of base metals comprising aluminum, nickel, copper, tin, lead and zinc is trading at levels only reached twice in modern history: in 2007-08 and 2011.
For the big five iron ore miners – BHP Group, Rio Tinto Group, Vale SA, Anglo American Plc and Fortescue Metals Group Ltd. – this exercise will only be the second time this century that they will earn more than their oil peers, estimates show. It would only be the first time if their oil rivals had not been weighed down by huge depreciations in 2020.
During the previous commodity boom, which peaked between 2008 and 2011, Big Oil easily made larger profits than Big Mining. Ten years ago, for example, the five energy majors – Exxon Mobil Corp., Chevron Corp., Royal Dutch Shell Plc, Total SE and BP Plc – delivered adjusted profits that were double that of the five great iron miners.
Today, soaring mining profits are another headache for big oil companies struggling to attract shareholders amid growing concern about climate change. While miners are already returning more money to investors, oil producers are just starting to do so, having cut dividends last year.
Miners also have a better story to tell: While oil contributes to global warming, certain metals – especially copper – are essential to building a greener future based on electric cars.
