By Ambar Warrick
Investing.com-- Major Australian mining stocks tumbled on Wednesday after Rio Tinto CEO Jakob Stausholm warned that copper prices are likely to face short-term pressure from steep inflation and supply chain disruptions.
Shares of BHP Group Ltd (ASX:BHP) and Rio Tinto Ltd (ASX:RIO), the two largest miners in the country, sank 2.6% and 3.1%, respectively. The two are highly exposed to the copper market, although BHP’s sales of the red metal are greater.
Smaller copper miners Newcrest Mining (ASX:NCM) and OZ Minerals Ltd (ASX:OZL) sank 2.9% and 1.1%, respectively.
Speaking to Bloomberg, Stausholm said that the aftereffects of the COVID-19 pandemic were still disrupting global supply chains, and that inflation trending at 30 to 40-year highs was likely to pose a challenge.
Stausholm’s comments come amid a deep decline in copper prices this year, as COVID-related disruptions in China, the world’s largest copper consumer, severely hurt demand. Elevated inflation and high energy prices have also disrupted industrial activity in Europe and the United States.
Rio Tinto, the world's second-largest miner, logged a drop in its profit for the first half of the year as weakening demand in China dented metal prices. The company also recently agreed to a $3.3 billion buyout of Canadian partner Turquoise Hill Resources (TSX:TRQ), giving it direct ownership of the massive Oyu Tolgoi copper mining project in Mongolia.
Stausholm said he expects growth to pick up eventually in China, given that it isn’t facing the same inflationary pressures as other countries. He also expressed confidence in copper’s long-term prospects, driven by a transition to low-carbon energy sources.
Copper prices may also take some support in the near term from a strike in Chile’s Escondida, the largest copper mine in the world. A worker’s union at the mine, which is owned by BHP, recently voted to begin work stoppages from this month.