Mining profits gloom as raw materials tumble to six-year low amid fears China slowdown will hit global growth

Investors are braced for another round of disastrous results from mining companies this week as the commodities rout takes its toll on profits.

The prices of raw materials such as copper and iron ore have tumbled to six-year lows amid fears that a sharp slowdown in the Chinese economy will hit global growth.

China is a big consumer of metals but its once booming construction and manufacturing sectors appear to have run out of steam – hitting commodity prices.

Rock hard times: The prices of raw materials such as copper and iron ore have tumbled to six-year lows

Figures last week showed that Chinese factories suffered their biggest fall in output for six-and-a-half years – a slump that wreaked havoc on financial markets around the world.

Diversified mining giant BHP Billiton and Chilean copper miner Antofagasta are among the blue chip firms that will release figures this week.

BHP, the world’s largest mining firm, is poised to report the worst annual slump in profits for a decade. Both companies are expected to outline drastic cost cutting programmes as the pressure mounts following the dismal performance of metal prices.

Mining companies have been cutting costs and reducing their spending to cope with the sustained weak prices.

Anglo American announced 6,000 jobs cuts last month and plans to sell off £2.5billion of assets while earlier this month Rio Tinto revealed a 43 per cent plunge in half-year underlying profits and further cuts to its costs and spending plans.

Last week commodities trader and mining group Glencore revealed a £432million half-year loss. Its share price has tumbled more than 45 per cent so far this year and is now at 158.5p compared with 530p a share when it floated in 2011. 

Glencore listed as commodities peaked when the price of copper hit a record $10,000 a tonne. It has now halved and is at levels not seen since 2009.

But Glencore chief executive Ivan Glasenberg blamed the commodity price slump on hedge funds who are short selling – or betting against – the market.

He said demand in China for copper had been holding up and added that ‘synchronised large-scale short selling’ was to blame.

Today South 32, a mining company spun out of BHP earlier this year, will report its full-year results, followed by BHP, the Anglo-Australian multinational, tomorrow. Antofagasta reports its half-year results tomorrow.

BHP’s shares are down more than 40 per cent in the past 12 months and last month it said its full-year production volumes were up 9 per cent.