BENGALURUMELBOURNE, Feb 14 Reuters Australia39;s iron ore giants BHP Group, Rio Tinto and Fortescue are set to report a steep drop in their earnings, which is set to compress their payouts to shareholders, after China39;s COVID lockdown drove down iron ore prices.

Earnings at Rio Tinto and BHP Group are seen declining 48 and 28, respectively, for the six months to December 2022, while Fortescue39;s halfyear earnings are set to slide about 16, based on estimates from Visible Alpha and Vuma Financial.

The miners are expected to offer a mixed outlook for 2023, amid uncertainty over the strength of China39;s recovery following the lifting of its strict COVID19 curbs.

We haven39;t seen too much hard data from China just yet, but I think there39;s enough for the miners to be more optimistic cautiously so, said Adrian Prendergast, an analyst at Morgans Financial in Melbourne.

The companies are also facing higher materials and fuel costs and a dearth of skilled workers that could impinge on their expansion projects.

Average realised prices for iron ore fell sharply in the six months to December, hitting earnings.

Dividend payouts are expected to fall, undermined by the weaker earnings and a push by the major diversified miners to fund growth, be it through building their own projects or through acquisitions, analysts at Goldman Sachs wrote in a note.

Buyout activity has been ramping up in the mining sector, as evidenced by Rio39;s recent 3.3 billion takeover of…