Leading Miners Report Amid China Uncertainty

Given recent uncertainty in commodity trends in China, investors will pay close attention to see whether leading miners Antofagasta and Rio Tinto achieved planned production targets.​

A Tough Spot for Miners

Commodity markets have remained volatile, though some gains from last week were maintained. The prices of key commodities such as steel rose ahead of the weekend, helping mining company share prices increase in anticipation of further economic stimulus in China. However, the market response was underwhelming, and steel prices initially fell before recovering to end the Asian session modestly higher.

Markets fluctuated but largely ended flat as investors digested the weekend speech by China's Finance Minister. The aim was to boost the economy, though specifics on policy changes were again lacking. However, new policies would need approval from China's National People's Congress later in the month. This may explain the absence of firm proposals for now and the mixed reactions across markets. Hong Kong fell while China rose; gold and copper were steady, while oil declined.​

What This Means for Miners

Major mining companies will update investors in the coming weeks, focusing on demand from China. If the world's largest importer of raw materials does not increase demand, investors could focus more on miners' efforts to reduce production costs.

Rio Tinto is the first to update investors Tuesday after the market close, but traders may be interested in any additional details on the recently announced $6.7 billion acquisition of Arcadium Lithium. The company had most recently expected production of its main commodities—iron ore, copper, and aluminium—to be largely unchanged from the prior year. After management touted strong cash flow in the mid-year update, traders will be interested to see if the company will consider stronger dividends if M&A deals do not eventuate.​

Antofagasta will announce its third-quarter production results on Wednesday before the market opens, reporting third-quarter production figures. The company had most recently guided copper production of 670-710 thousand tonnes but said the final result would likely be near the lower end of that range. Last quarter, it increased copper production by 20% and was looking to expand that capacity as it continued working on a second concentrator at Centinela.

RIO in Long-Term Triangle

Rio Tinto appears to trade within a long-term triangular pattern that may have concluded at the 5000 handle, indicating potential for further gains above 5500 and 5850. In fact, with the 6400 and 6800 swing potentially taken out, the long-term outlook for Rio Tinto remains positive as the projected move points to 8000. However, short-term declines below key support levels down to the 4670 region are possible. Nonetheless, if the share price fell below the 4500 double-bottom formation low, the price might fall towards 4000 should downward momentum breach 4350 and 4250.​

Source: SpreadEx / RIO TINTO

Key Takeaways

Key mining companies Rio Tinto and Antofagasta are due to report their production figures amid ongoing uncertainty in the Chinese commodity market. While prices rebounded last week, the response has been mixed as investors await further details on China's economic stimulus plans. On Tuesday, Rio Tinto will update investors on whether it met production targets for iron ore, copper and aluminium. Antofagasta will also report its third-quarter copper production figures, on Wednesday, relative to its previous guidance of 670-710 thousand tonnes. The reports will provide insight into ongoing demand from China, with investors focusing on cost-reduction efforts if the stimulus does not increase raw material imports.​