Mining shares slump on steel production fears

LONDON’S major mining companies led the FTSE 100 lower after a warning from

BHP struck a nerve.

The Anglo-Australian miner said global steel production – excluding China – could drop sharply this year due to the pandemic.

Although it didn’t offer a specific figure, BHP said it could fall by double digits in percentage terms. Steel is often seen as an economic bellwether. Higher production and demand tend to go hand-inhand with economic growth and the expansion of industries such as construction.

BHP’s words, then, spooked its peers. Russian steelmaker Evraz tumbled 11.2pc, or 29.6p, to 233.8p, while fellow commodities behemoths Rio Tinto (down 5.2pc, or 199p, to 3633.5p) and Glencore (down 6.6pc, or 9.48p, to 133.58p) also notched up big losses.

BHP softened the blow somewhat by confirming it will still produce the same amount of iron ore – a key ingredient in steelmaking – as planned this year, between 273m and 286m tonnes. Its shares fell 6.4pc, or 84.4p, at 1226p.

But beyond steel, BHP was also on the back foot after warning its oil output would hit the bottom end of previous guidance amid a huge slump in demand.

Too much supply and far too little demand during the pandemic sent oil prices crashing again yesterday. The US benchmark price, West Texas Intermediate crude, was still trading at around $0, while Brent crude, the global benchmark, shed almost a quarter of its value, dipping below $20 a barrel.

The latest turmoil sunk shares in London-listed oil firms Royal

Dutch Shell, which fell 4.2pc, or 57p, to 1288p, and BP, which lost 3pc, or 9.15p, to close at 293.15p. The combination of mining and oil behemoths losing ground dragged the FTSE 100 2.96pc lower, or 171.80 points, to 5641.03, while the FTSE 250 fell 2.68pc, or 423.48 points, to 15399.25.

Embattled explorer Tullow Oil shed 7.6pc, or 1.34p, to finish at 16.28p on the same day it appointed former Cairn India boss Rahul Dhir as chief executive.

Other commodities also sunk, with copper shedding 5pc and gold 2pc. But mid-cap miner Centamin managed to outshine other gold stocks, rising 2.1pc, or 2.95p, to 141.35p as it bucked the trend on dividends.

It pledged to pay an interim dividend of six cents per share after it produced 125,000 ounces of gold from its mine in Egypt in the first quarter.

Capita, however, was forced to scrimp, cutting bonuses for anyone in the executive or senior teams who take part in long-term share plans.

Chief executive Jon Lewis and finance boss Patrick Butcher will also be awarded 70pc fewer shares via long-term schemes. The measures failed to perk up investors, with shares dipping down by 9.2pc, or 3.23p, to 32.08p. Food delivery firm Just Eat

Takeaway dished up good news. The Just Eat division, which is merging with Dutch rival Takeaway, said orders rose 6pc to 65.3m between January and March, and that although there was a slight dip orders have now climbed back to pre-lockdown levels. However, shares fell 1.1pc, or 92p, to 7810p.

And investors in Joules – up 25.3pc, or 19p, to 94p – which is known for its Breton T-shirts and colourful anoraks, breathed a sigh of relief as it secured a £15m increase to the amount of credit it has available, and said it was dealing with higher than expected demand for its clothes online.

Elsewhere, shares in Avation, which leases around a dozen planes to Virgin Australia, lost ground, falling 6.5pc, or 9p, to 130p, after the airline voluntarily entered administration.