COMMODITIES

SAUDI MINING SHOWS ITS METTLE AS GLOBAL COMMODITIES RALLY

Saudi Arabia’s Ma’aden delivered its best-ever half yearly performance, as the commodity market enjoyed a strong rally.

The Saudi Arabian Mining Company saw its second quarter net profit surge 85% to SAR 4 billion, quarter on quarter (QoQ), and by 232% in the first half of the year compared to the same period last year to reach SAR 6.2 billion. QoQ sales rose 95% to SAR 11.9 billion, bringing H1 2022 sales to SAR 20.8 billion, an 80% improvement on H1 2021.

Earnings before interest, taxation, depreciation, and amortisation (Ebitda) stood at SAR 6.9 billion, underscoring robust sales performance.

“Ma’aden delivered a record first half, driven by enhanced operations leading to increased sales,” said Robert Wilt, the company’s CEO. “This record performance was supported by favourable market dynamics, delivered while maintaining the highest safety standards and making progress towards our ESG goals.”

The company, which employs 6,000 people, aims to continue investing in production capacity across its current portfolio to meet demand, while exploring Saudi Arabia’s untapped mineral resources to ensure long-term sustainable growth.

Indeed, project development played a key role in boosting production volumes.

Ma’aden’s Ammonia III ramped up production to an output capacity of 1.1 million tonnes per year and is part of an ongoing expansion, which will strengthen the kingdom’s position as one of the top producers of phosphate fertilisers in the world.

“Production at Ma’aden Wa’ad Al Shamaal Phosphate company continued to ramp up, leading to a 15% increase in phosphate fertiliser sales volumes at the plant compared to Q2 2021. The aluminium business also continued its strong performance, on the back of stable efficiency in operations and increased sales,” the company said.

                 

The company is also on track to raise its gold mining capacity by 70% with a new plant in Mansourah Massarah, which is in commissioning phase.

Gold is up 2.6% year on year, and continues to trade at an elevated level at USD 1,800 per troy ounce.

The Ministry of Industry and Mineral Resources has issued just over 2,000 mining licences this year, according to the report of the National Industrial and Mining Information Center. Building material and quarry licenses took the lead at 1,357, followed by exploration licenses (497), exploitation licenses (165), reconnaissance licenses (29), and surplus mineral ore licenses (21).

 

Despite falling in June, commodity indices grew strongly in the first half of 2022, with the UBS Constant Maturity Commodity Index gaining 15.7% in the first six months of the year, while the Bloomberg Commodity Index (BCOM) gained 18.4%.

“Inflation and the Russia-Ukraine war kept commodities strong on concerns over commodity supply. We believe that this outlook for continued lack of supply has not changed and will likely keep commodities in a long-term bull market,” according to VanEck, an ETF company. “Near-term markets are adjusting to slower global growth expectations, and fears over the demand outlook. The expected slower growth could reduce both supply and demand, leading to even stronger commodity price gains in the future.”

Energy sector led the gains in the first half of 2022, rising 52% as market fretted over tight global supplies and rising demand. The Russia-Ukraine war disrupted supply of energy to Europe. Within the energy sector, the strongest performers were gasoil (+86%), heating oil (+73%), and gasoline (+56%).

OPEC estimates world oil demand will rise 3.1 million barrels per day (mbpd) in 2022, although it was slightly lower than its previous forecast. The oil exporters group expects oil demand in the OECD to grow by 1.6 mbpd, while the non-OECD is expected to expand by 1.5 million bpd. Total oil consumption is expected to average around 100 mbpd in 2022.

“For 2023, the forecast for world oil demand growth remains unchanged at 2.7 mbpd, with total oil demand averaging 102.7 mbpd. The OECD is expected to grow by 0.6 mbpd and the non-OECD by 2.1 mbpd. Oil demand in 2023 is expected to be supported by a still-solid economic performance in major consuming countries, as well as improving geopolitical developments and improvement of COVID-19 in all regions,” OPEC noted.

Other commodities are diverging. Agriculture was the second best performing sector, rising 13%, with the Russia-Ukraine war primarily responsible for the price gains. Wheat and soybeans were up 20% and corn was up 14%.

However, industrial metals sector declined 9% during the period, as investors remained anxious about demand due to China’s COVID-19 lockdowns, and a more subdued global economic outlook. Copper was among the biggest decliners, falling 16% during the first half of the year.