Anglo American's iron ore profits hammered by falling commodity prices

Anglo American’s part-owned South African iron ore division saw profits sink in 2014 as a result of a 28% drop in average prices over the year.

Kumba Iron Ore, the fourth-largest producer of the commodity in the world, said the iron ore export price averaged just $97 per tonne, after sinking from $134 at the start of the year to just $71.75 by December.

The plunge in prices followed strong growth in supply, particularly from the major producers, combined with slower growth in crude steel output in China.

The result was that revenues fell by 13% to 47.6bn rand (£2.7bn) and headline earnings dropped 29% to R11bn (£620m).

In a statement to the market on Tuesday, parent company Anglo American, which owns nearly two-thirds of Kumba, said that the division’s contribution to its underlying earnings for 2014 would be just $693m, compared with $1.11bn in 2013.

“Iron ore prices were the single biggest factor to negatively affect our results for 2014,” said Kumba’s chief executive Norma Mbazima.

“Markets have become much tougher, with prices significantly declining throughout the year.”

Anglo shares were down 0.7% at 1,176p in early deals in London.