'Raw Material Price Surge' Mining and Energy Companies' Q2 Net Profit Soars

[Photo by Reuters-Yonhap News]

[Asia Economy Reporter Park Byung-hee] Due to the rise in raw material prices following the global economic recovery, the net profits of major global raw material companies in the second quarter have significantly increased.

The world's largest steelmaker ArcelorMittal announced that its second-quarter net profit rose sevenfold year-on-year to $5.1 billion. This is the highest net profit since 2008, surpassing analysts' expectations of $4.67 billion. ArcelorMittal also announced a $2.2 billion share buyback plan.

ArcelorMittal stated that it has raised its steel consumption growth forecast for this year from the previous 4.5-5.5% to 7.5-8.5%. It noted that the construction sector is rebounding due to the economic recovery. In particular, it expects steel demand to increase as governments around the world embark on infrastructure construction as part of economic stimulus measures.

ArcelorMittal plans to invest $10 billion by 2030 to reduce carbon emissions generated during the steel production process.

The world's largest iron ore producer Rio Tinto reported that its pre-tax net profit for the first half of the year increased by 240%, reaching a record $18 billion. The pre-tax net profit already exceeds last year's annual net profit by $2.6 billion. First-half sales were $33 billion. Rio Tinto announced a record dividend of $5.61 per share, totaling $9.1 billion.

Rio Tinto earns 85% of its net profit from iron ore production. Against the backdrop of increased demand from China, iron ore prices hit a record high of $233 per ton in May.

The world's largest raw material brokerage firm Anglo American also announced that its pre-tax net profit for the first half of the year reached a record $10.1 billion. Last year's first-half net profit was only $1.7 billion. Anglo American has already achieved nearly twice last year's annual net profit of $6 billion in the first half. First-half sales were $21.7 billion.

Anglo American announced a total capital expenditure plan of $4.1 billion. It plans a $1 billion share buyback and a dividend of 3.31 cents per share, totaling $3.1 billion. The dividend amount is more than double last year's $1.25 billion.

Consulting firm PricewaterhouseCoopers (PwC) forecasted that the pre-tax net profit of 40 global mining companies will reach a record $118 billion this year, a 68% increase compared to last year.

However, mining companies expect their performance to slow in the second half of the year as global economic growth decelerates. Anglo American reported that its costs increased by 15% in the first half.

[Photo by Reuters-Yonhap News]

With rising oil prices, large oil and energy companies also increased their net profits.

Royal Dutch Shell's second-quarter net profit rose from $3.2 billion last year to $5.5 billion this year, exceeding analysts' expectations of $5 billion. Shell announced it will increase its quarterly dividend to 24 cents per share starting in the second quarter. Last year, Shell reduced its dividend from 48 cents to 16 cents per share. This was the first time Shell cut dividends since World War II.

Total also reported a 15% increase in second-quarter net profit to $3.5 billion year-on-year.

Major U.S. refiners turned profitable. ExxonMobil and Chevron posted net profits of $4.7 billion and $3.1 billion respectively in the second quarter. Last year, they recorded losses of $1.1 billion and $8.3 billion respectively.

However, ExxonMobil and Chevron said they will reduce their investment scale compared to last year.

ExxonMobil expects its capital expenditure this year to be around $16 billion, at the lower end of the previously forecasted $16-19 billion range. Its capital expenditure in the first half of the year was $6.9 billion, including $3.8 billion in the second quarter.

Chevron's capital expenditure in the first half decreased from $7.7 billion last year to $5.3 billion this year.