Kumba pins hopes on China’s infrastructure stimulus

Its headline earnings per share – the main profit measure in South Africa – stood at 36.13 rand ($2.16) for the six months to June 30, compared with 72.82 rand last year.

China is the world’s top producer of steel, which is made using iron ore mostly for real estate and infrastructure. Chinese policymakers have pledged to boost infrastructure spending to revive the world’s second-biggest economy after it slowed sharply in the second quarter, hit by strict covid-19 containment measures and a distressed property market.

“There’s a significant stimulus that’s being provided by the Chinese authorities. We expect that to have an effect on iron ore demand. It is all about China in the iron ore market, so you would expect some support to come on that Chinese stimulus,” Timo Smit, Kumba’s executive head of marketing, said during a results call.

Iron ore prices touched two-week highs on Tuesday, extending a rally driven by hopes that Beijing’s support for the real estate industry would also lift demand.

First-half production at Kumba’s two mines declined 13% to 17.8 million tonnes, largely due to heavy rains that impacted mining operations in the Northern Cape in the first quarter.

These operating challenges were worsened by supply chain disruptions and rising costs, partly due to the conflict in Ukraine, weaker steel demand after covid-19 lockdowns in China and a softer global economic outlook, Kumba said in a statement.

Kumba, which is 70% owned by Anglo American Plc, declared an interim dividend of 28.70 rand.

($1 = 16.7401 rand)

(By Nelson Banya; Editing by Subhranshu Sahu and Mark Potter)