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FMG, Rio Tinto and BHP’s latest production results compared

We compare and contrast the latest quarterly production results from Australia’s big three miners.

FMG, BHP and RIO in focus Source: Bloomberg

As iron ore prices remain elevated, we compare and contrast the latest set of quarterly production results from BHP Group (BHP), Rio Tinto (RIO) and Fortescue Metals Group (FMG).

Indeed, although many commodities have struggled this year, oil in particular – iron ore, which remains the major driver of profitability for Australia’s three large-cap miners – has held up remarkably well.

Looking at the iron ore futures curve, we have to wait until August 2021 until the 62% Fe Fines, CFR China Futures dips below US$70 per tonne.

For reference, the front-month, May contract last traded at US$82.37 per tonne.

Quarterly production results compared

Looking at the recent production results, shipments rose across all three of Australia’s large-cap iron ore miners.

On a 100% basis, Rio Tinto shipped an impressive 72.9 million tonnes during the quarter, representing a 5% increase on the prior corresponding period.

By comparison, BHP reported iron ore shipments of 60 million tonnes for the quarter, implying a 7% increase on the prior corresponding period. The diversified miner is currently forecasting full-year shipments of 242-253 million tonnes or 273-286 million tonnes on a 100% basis.

Finally, FMG recorded Q3 iron ore shipments of 42.3 million tonnes – representing an impressive 10% increase on the prior corresponding period.

Better still, the pure-play iron ore miner also upgraded its shipments guidance as part of its latest quarterly release, with FY20 shipments now expected to come in at between 175-177 million tonnes.

Previous full-year expectations were set at 170-175 million tonnes.

The cost of doing business

Out of the big three, FMG continues to be the front-runner in terms of cost efficiency. Here, the miner actually saw its costs per wet metric tonne fall 2% in the quarter, to hit US$13.27 per tonne. For the full-year, the pure-play miner is expecting costs to come in even lower, citing 'C1 cost guidance of US$12.75 - US$13.25' per wet metric tonne.

By comparison, BHP sits at the middle of the pack, most recently noting that its full year West Australia Iron Ore (WAIO) cost guidance remained unchanged at US$13 to US$14 per tonne for FY20.

Rio Tinto’s full-year iron ore cost guidance also remained unchanged, at US$14 to US$15 per tonne.

BHP, Rio Tinto and FMG share prices: the outlook

Looking forward, not only do futures prices suggest a favourable outlook for iron ore, but according to the miners themselves, Chinese demand has remained robust, even in the face of Covid-19-induced economic uncertainty.

Fortescue noted that Chinese demand for its products was strong, with Elizabeth Gaines, FMG's Chief Executive, saying that we 'anticipate a steady recovery in economic activity in that market.'

BHP and RIO’s management said mostly the same thing, with it being noted that while demand in China has remained resilient, in other countries across the globe the outlook remains more mixed.

Specifically, Rio Tinto’s management pointed out that:

'Demand for the high-quality iron ores we produce remained strong in the first quarter of 2020, mainly driven by a combination of seaborne supply disruptions and solid demand from China's steel mills despite Covid-19 impacts.'

Demand or not, the current environment remains one marred by volatility. On no news in particular, the ASX 200 was down 213 points, or 3.87%, to the 5,308 point level, as of 12:11PM AEDT.

The big three experienced even more pronounced losses, with the FMG share price down 6.06%, BHP’s stock fell 6.80% and Rio Tinto’s share lost 5.43%, a little before noon.

How to trade the big three miners – long and short

What do you make of the current situation: do you see bullish or bearish opportunities? Whatever your view, you can use CFDs to trade any of Australia’s big three miners – long or short – using IG’s world-class trading platform.

For example, to buy (long) or sell (short) Fortescue Metals Group using CFDs, follow these easy steps:

  • Create an IG trading account or log in to your existing account
  • Enter ‘FMG’ in the search bar and select it
  • Choose your position size
  • Click on ‘buy’ or ‘sell’ in the deal ticket
  • Confirm the trade

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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