Join our community of smart investors

FTSE 350: How long can the mining dividend bonanza last?

Iron ore prices face headwinds while operating costs are rising
April 28, 2022

The first ripples of the current inflationary environment came from higher metals prices. The Covid-19 bounceback saw iron ore trade at highs not seen for over a decade thanks to Chinese government stimulus spending, while copper hit a new record off the back of both higher demand and disrupted supply. 

This led to record dividends from the major miners, who have embraced new operating practices that eschew multi-billion-dollar deals in favour of handing cash back to investors. One mining investor recently suggested to Investors’ Chronicle the lack of incoming capacity could reduce the inherent cyclicality of the sector. That said, predictions are already coming in about the end of the iron ore bull market – and the raw material is the key driver of Rio Tinto (RIO) and BHP’s (BHP) profits. 

“We forecast a large pullback in seaborne [shipped] ore demand this year,” said Liberum analyst Tom Price. “This weakness relates largely to an inflation hit to steel production itself and subdued steel demand.”  

This is subscriber only content
Start your trial to keep reading
PRINT AND DIGITAL trial

Get 12 weeks for £12
  • Essential access to the website and app
  • Magazine delivered every week
  • Investment ideas, tools and analysis
Have an account? Sign in