Clara Denina and Shashwat Awasthi

(Reuters) – If global mining companies are to reach annual production targets they must address COVID-related labor shortages and soaring costs, according to analysts following downbeat quarterly statements.

London-listed Anglo American (LON) Antofagasta LON: are among the companies that have either decreased annual production targets, or expected capital expenditures. This is partly due to the large-scale inflationary pressure caused by rocketing diesel prices.

Accordingly, analysts anticipate earnings being driven down this year and next.

RBC Capital Markets for instance, predicts that Anglo’s earnings prior to interest, taxes and depreciation (EBITDA), will fall by a fifth and 12% respectively in 2022 and 2023.

Rio Tinto and BHP (NYSE;) the largest mining companies in the world, both reported that their January-March iron ore production was below expectations.

Pandemic-led border control in Western Australia for large parts of the quarter was the common factor that caused a shortage of train drivers and miners, prior to COVID cases rising after the curbs were removed.

China is the largest iron ore producer, and its main customers are China’s steelmaker, the World Steel Corporation. However, China will reduce its crude steel production this year in an effort to combat pollution. China has already reduced around 30,000,000 tonnes of steel production by 2021.

Analysts also warned of the potential dangers posed by China’s recent COVID-19 lockdowns.

RBC noted in a memo that “lower steel production could cause inventories to rise into seasonalally stronger supply which could push iron ore costs.”

GRAPHIC: Rio Tinto quarterly iron ore shipments – https://fingfx.thomsonreuters.com/gfx/mkt/dwpkrydwwvm/VGTsf-rio-tinto-quarterly-iron-ore-shipments%20(1).png

According to Jefferies analysts, the setback would be for, which is used in a variety of products, including wires, pipes, solar panels, wind turbines, and electric cars. However, it seems increasingly probable, Jefferies stated.

Freeport McMoRan Copper Mines has lowered its 2022/23 sales forecast, despite the production increase of the first quarter.

In 2021 the world’s biggest listed miners made record profits, thanks to a rocketing price for all commodities, including copper, iron ore, and coal. This allowed them to lavish cash on shareholders.

It is highly unlikely to happen again this year, as lower demand could lead to higher inflation. As a result, market prices will be subdued and production costs increase.

Rio Tinto, Anglo-Australian Rio Tinto admitted that it had to improve its operational performance following a quarter in which shipments to the Pilbara resource-rich region fell to a three year low.

Peter O’Connor from Shaw and Partners, senior analyst said that Rio has much to do to be redeemed as a global mine operator and industry steward.

GRAPHIC: BHP quarterly WA iron ore production – https://fingfx.thomsonreuters.com/gfx/mkt/zjvqkmjbrvx/13IvM-bhp-quarterly-wa-iron-ore-production.png