Iron Maiden

Image source: Bodor Tivadar, Cafe Racer - Shutterstock Jonne Huotari @jiihu - Unsplash

What's going on?

Rio Tinto was born to (extract ore from) rock: the worlds second-biggest mining company announced better-than-expected earnings on Wednesday.

What does this mean?

Rios done well out of Chinas rapid post-pandemic recovery: the price of the companys most important commodity iron ore jumped almost 85% last year on the back of strong demand from Chinas massive steel-making industry. That led Rio to announce a higher-than-expected profit, not to mention the biggest dividend payout in its 148-year history.



Never one to rest on its laurels, Rio will be spending more on new green technologies too specifically those that lower the emissions its customers generate when they process its raw materials. And since steelmakers single-handedly account for 7% of direct fossil fuel emissions, that could be a big step forward for the industry.

Why should I care?

For markets: Miners arent making mistakes of the past.


The worlds biggest miner impressed earlier this week too: BHP released a strong earnings update and handed out a bumper payout of its own. Both miners dividend announcements will come as a relief to their shareholders, who mightve been nervous theyd use the money to buy lower quality mines just to get their hands on more ore. Thats what they did at the peak of the last commodity cycle a decade ago, and it all ended in tears when prices came crashing down.



The bigger picture: You are now entering a commodities supercycle.


JPMorgan and Goldman Sachs reckon this is actually the start of a years-long supercycle of commodities gains for only the fifth time in history, no less. An economic recovery and the green revolution should, they reckon, drive a lot of commodity-dependent infrastructure investments. And given theres a limited supply to meet this rising demand, that should push prices higher for longer. Hedge funds, for their part, seem to agree: theyve already allocated more money to commodities than they have in a decade.

Originally posted as part of the Finimize daily email.

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