Rio beats estimates despite China pressure

Mineral Resources (ASX: MIN) will sell a 30% stake in its operational lithium business to POSCO Holdings for $1.2b (US$765m).

Australia’s economic outlook has shifted following escalation of conflict in the Middle East as rising energy costs are expected to push inflation higher than previously forecast, according to Commonwealth Bank economists.The Organisation for Economic Co-operation and Development (OECD) lifted its inflation forecast for Australia in 2026 to 4.1%, citing higher oil prices and renewed disruption to global energy markets.Commonwealth Bank Australia (CBA) expects inflation to rise further in the near term while economic growth slows as households and businesses face higher costs and tighter financial conditions.Commonwealth Bank Australian economics head Belinda Allen says the energy shock has complicated an already delicate economic balance.“Prior to the conflict, the Australian economy was operating above its supply capacity and inflation was proving stubborn,” she said.“The latest energy shock adds a new layer of complexity, lifting inflation further while also weighing on growth.“There is a wide range of possible outcomes from here.“What is clear is that higher energy prices are a headwind for the economy and both households and policymakers will need to navigate a more challenging environment.”Under CBA’s central oil price scenario, headline inflation is now expected to rise to about 5.4% by mid 2026 and trimmed mean inflation, the Reserve Bank of Australia’s preferred underlying measure, is forecast to peak at 3.8% before easing gradually as economic growth slows and labour market conditions soften.The most immediate impact is expected to come through fuel prices as retail petrol and diesel prices have already risen sharply and could increase further in coming months as global oil prices remain elevated.Beyond fuel, higher energy costs are expected to flow through to a wide range of goods and services, including transport and freight, as supply chain disruptions linked to shipping routes through the Middle East are also adding to pricing pressures.While inflation in Australia is expected to remain elevated in the near term, CBA economists expect it to moderate in 2027 as demand slows and unemployment rises.Business investment growth is also expected to be softer, though CBA assesses that the pipeline for business investment is less sensitive to these headwinds than households.However, softer economic conditions and higher oil prices are still expected to impact the profitability of many businesses, which will reduce the cashflow available for investment.Another risk is financial market stress increasing globally, which would make funding conditions in Australia for large projects more challenging and slow the rollout of projects, including within the resources sector.However, this outlook remains highly uncertain and will depend heavily on how the conflict evolves and how long energy prices remain high, CBA economists say.

The Simandou iron ore project in Guinea is set to be the primary catalyst for long-term supply growth of seaborne iron ore as ramp-up begins, according to Wood Mackenzie.Wood Mackenzie expects Simandou to export around 16mt in 2026, with volumes rising progressively thereafter despite infrastructure bottlenecks and logistical complexities driving a phased and non-linear increase in output.After more than two decades of delays, the project entered its execution phase following Guinea’s political reset in September 2021, which resolved a long-standing development deadlock. Development has since progressed steadily, with early exports now in focus and downstream market impacts beginning to emerge.Rather than simply adding volume, Simandou is expected to displace higher-cost supply, tightening the competitive landscape and reinforcing a sharper cost and quality hierarchy across the seaborne market, according to Wood Mackenzie.Wood Mackenzie iron ore research director David Cachot says Simandou will become the single biggest driver of seaborne supply growth over the coming decade.“These tonnes will increasingly displace higher-cost supply, reshape the cost curve and reinforce the market’s shift toward higher-quality material,” he said.“The ramp-up will not be linear, and that uncertainty will be a key factor shaping market sentiment in the near term.”For Australian producers, near-term impacts remain manageable as the Pilbara continues to benefit from blending optionality, with lower-grade ores clearing the market efficiently when combined with higher-quality material, according to Wood Mackenzie.However, Wood Mackenzie expects this advantage to erode over time and, as Simandou ramps up and demand preferences shift toward higher-quality feedstocks, competitive pressure is likely to emerge first in lower-grade supply.“This does not imply an abrupt displacement of Pilbara volumes,” Mr Cachot said.“Rather, it highlights where pressure will emerge first, as marginal tonnes become increasingly vulnerable in a more quality-sensitive market.”The competitive interaction with Brazil appears more direct as Brazilian producers, particularly Vale, compete head-to-head with Simandou on quality, prompting a shift toward greater portfolio flexibility.Rather than defending every premium tonne, producers are increasingly optimising product mix, including blending strategies and selective use of third-party material and, while high-grade Brazilian supply remains well positioned over the longer term, increased competition in premium segments may place pressure on realised premia, Wood Mackenzie reports.Simandou sits within a broader wave of African supply development, alongside emerging iron ore projects in Gabon, Congo and Algeria which, together, point to a more geographically diversified and increasingly Africa-centric supply landscape.Simandou’s rise also coincides with broader structural shifts in the global steelmaking market including industry consolidation, decarbonisation pathways and the growth of direct reduced iron (DRI) production.As steelmakers prioritise efficiency and emissions reduction, raw material quality is becoming increasingly central to competitiveness, according to Wood Mackenzie.“The strategic importance of high-grade iron ore in enabling lower-emissions steelmaking is becoming increasingly clear,” Mr Cachot said.“DRI and other emerging technologies remain highly sensitive to feedstock quality, reinforcing long-term demand for premium products.”

Energy grid overhaul costs hit $128b, coal remains criticalThe Australian Energy Market Operator (AEMO) draft 2026 integrated system plan (ISP) indicates that current strategies may not deliver energy security or climate objectives.The ISP confirms that coal will be required to stabilise the National Electricity Market (NEM) until 2049 — twelve years longer than previously forecast — and transmission cost estimates have increased by up to 100% in real terms.Consistent with previous reports, electricity consumption is expected to nearly double by 2050, driven by electrification of transport, expansion of data centres and industry shifting from gas to electricity. At the same time, two-thirds of the remaining coal fleet would close by 2035, with all due to retire by 2049.AEMO chief executive Daniel Westerman says renewable energy, firmed with storage, backed up by gas and connected with upgraded networks remains the least-cost roadmap to meet Australia’s energy needs.“Extensive stakeholder consultation and modelling of thousands of potential investment combinations has identified the least-cost option,” he said.Consumers will continue to play a major part in Australia’s energy transition, with expected investment in 87GW of small-scale solar, 27GW of behind-the-meter batteries and 9GW of coordinated storage from electric vehicles by 2050.“Australian consumers are world leaders in rooftop solar and are now adding home batteries and electric vehicles,” Mr Westerman said.“If those consumer devices can respond to market signals through their retailers, it will result in a lower cost power system for everyone.”This analysis underscores the need to continue to progress with investments identified in the ISP so the energy transition can deliver the lowest cost outcomes to consumers without placing more pressure on household incomes and industrial competitiveness.“While momentum in investment and delivery continues to build, challenges remain in delivering essential infrastructure at the pace required. Slower progress will erode benefits to consumers and present risks to reliability,” Mr Westerman said.To deliver the least-cost optimal development path (ODP) proposed in the draft by 2050, it would require about 120GW of grid-scale wind and solar, around 55GW of dispatchable storage (including batteries and pumped hydro) and 14GW of flexible gas.A further 6,000km of new transmission lines would also need to be added — a 13% expansion on today’s 44,000km network, but down from the 10,000km stated in the plans 2024 rendition.Since the draft 2024 ISP release, multiple renewables and grid expansion projects across Australia have been scrapped or delayed.In June the Queensland Government walked away from plans to build the $1b Moonlight Ridge wind farm. In October Snowy Hydro ordered the comprehensive review of its $12b Snowy 2.0 pumped hydro project in NSW due to material cost pressures.Future Coal chief executive Michelle Manook says the report challenges the ideology of a “renewables-only” transition.“It confirms that Australia’s current pathway is misaligned with engineering and cost realities, or the original intent of the Paris Agreement,” she said.“Major economies, including Japan, India, China and the US, continue to invest in modern, and increasingly abated, coal solutions across the value chain… Australia has been left behind, while other nations modernise their coal value chains to balance economic and energy security with emissions reductions and sustainability goals.“Climate policies need to reflect engineering reality, not ideology, otherwise Australians will continue to face rising costs, worsening reliability and still fall short of climate targets.”In October, the Queensland Government released an energy roadmap, outlining that coal will continue to underpin affordable and reliable energy supply to the state for as long as needed with gas emerging as a critical technology for system reliability.AREEA chief executive Steve Knott says it’s encouraging to see the Queensland Government acknowledge that reliable, affordable energy still depends on a strong resources industry.“The Government’s commitment to progressing enabling projects like CopperString, unlocking the North West Minerals Province and expanding gas supply means more investment, more production and more high-quality Queensland jobs,” he said.“But the roadmap will only deliver if governments at all levels work together to address logjams in the approvals system and ensure projects are not stuck in bureaucratic limbo, putting Queensland’s competitive edge at risk.How the Queensland Government’s decision to allow state-owned coal power stations to run “to the end of their technical lives” will align with climate targets is yet to be confirmed.In November, the Climate Change Authority (CCA) reported that the pace of emissions cuts would need to triple to meet Australia’s legislated 2035 target of reducing 2005-level carbon pollution by 62-70%.The CCA found the electricity and energy sectors were making the fastest gains — contributing to half the nation’s emissions reductions over the past year — improving the prospects for other sectors of the economy to decarbonise as they electrify.The final 2026 ISP is expected to be released in June next year.