Global mining company Anglo American expects to take a writeoff of between $3 billion and $4 billion in its first-half results. As Hayley Platt reports it's largely due to the slide in prices for iron ore and coal.
A global glut of iron ore and coal, used to make steel, is a big challenge for Anglo American. The London-listed miner expects to write-off between $3 and $4 billion in its first-half results because excess supply is pushing down prices. It comes on top of a $3.9 billion writedown in February, when it also posted a 25 per cent drop in underlying operating profit. Holger Schmieding is Chief Economist at Berenberg Bank. SOUNDBITE: Holger Schmieding, Chief Economist, Berenberg Bank, saying (English): "Prices have been high for a long time, as a result people have been digging to find more commodities. There is now plenty of supply to meet demand." Last year iron ore was the company's most profitable commodity. And it had been ramping up production at its new Brazilian plant. But over the past 12 months the value has almost halved, partly thanks to a slowing Chinese economy. SOUNDBITE: Holger Schmieding, Chief Economist, Berenberg Bank, saying (English): "I do think that global demand will be firm enough to prevent massive slides in commodity prices at the levels we have but that is only the overall macro economic view." Anglo American has been trying to counter the slide by improving its mining operations and selling less profitable assets. It's also been diversifying. But its other commodities are also lagging. Copper production in the second quarter fell by 5 percent, mainly due to production issues in Chile and temporary shutdowns elsewhere. Diamond output also fell 6 percent at Anglo's subsidiary De Beers - last year it was the company's second-largest earner.