Iron ore soars Rio Tinto easily sets a new profit record and China ranks first among its largest customers.

(Rio Tinto), an international mining giant, released its 2021 annual report on Feb. 23, local time, reporting record profits driven by strong demand for iron ore in China and doubling commodity prices.

According to the company, consolidated sales reached $63.595 billion in 2021, up nearly $20 billion from 2020, and profits for the reporting period reached $21.305 billion, up 73% from a year earlier, in line with analysts' median expectations.

Driven by strong profits, Rio Tinto's dividend level in 2021 also reached an all-time high, including the $9.1 billion dividend announced in 2021, and the overall dividend in 2021 will reach $16.8 billion, about 80 per cent of the reported profit.

In terms of profit segment, the iron ore business remains the main source of Rio Tinto's profits, contributing a total of $17.3 billion in 2021, while profits on aluminium, copper and other minerals were $2.468 billion, $1.579 billion and $888 million, respectively. China continues to be Rio Tinto's largest customer, contributing nearly 60 per cent of the group's revenue.

Rio Tinto revealed that regional port sales in China surged to 14 million tons in 2021, more than doubling from 5.5 million tons in 2020. This form of transaction is mainly aimed at small and medium-sized customers, enough to see the shortage of iron ore.

It should be noted that the production capacity and shipments of Rio Tinto's Pilbara (Pilbara) iron ore actually declined slightly in 2021 compared with the same period last year, and the increase in profits was mainly driven by volatile prices. Iron ore prices, which rose all the way above $200 a tonne in 2021, have rebounded to around $150 after falling quickly below $100 at the end of the year.

The company said in its outlook that the production cost of Pilbara iron ore is expected to range from $19.5 to $21 in 2022 after the cost of iron ore production has risen to $18.6 per tonne in 2021.

Progress in business transformation

Rio Tinto, which relies heavily on iron ore revenues, is also working to expand its renewable energy-related mining assets, with capital expenditure expected to reach $8 billion in 2022 and gradually rise to $90 and $10 billion over the next two years, including $1.5 billion in carbon reduction projects.

However, the transformation of Rio Tinto has not been smooth. In January, the Serbian government cancelled the permit for Rio Tinto's lithium project in protest, which the company had expected to be "the largest lithium mine in Europe". In its annual report, the company also said it was reviewing the legal basis for the Serbian government's decision.

Rio Tinto also revealed that the delayed and overspent Mongolia Oyu Tolgoi expansion project is expected to start production in the first half of 2023, with capital expenditure expected to reach $6.925 billion. In order to advance the project, Rio Tinto also waived the debt of the Mongolian government in January.