Rio Tinto has ramped up iron ore production in the Pilbara on Australia’s west coast, shipping enough of the key steelmaking material to hit the top end of its forecasts, but the mining giant warned China’s recovery is falling short of expectations.
The price of iron ore, one of Australia’s most lucrative exports, fell during the June quarter, down from elevated levels last year as a property slump in China – by far the world’s biggest steelmaker – and slower-than-expected global growth reduced demand for steel.
Rio Tinto’s Pilbara operations produced 81.3 million tonnes in the second quarter, about 3 per cent higher than the same quarter last year.Credit: CUHRIG
After bottoming out at around $US98 in late May, iron ore prices have improved to about $US116.
Australia’s miners are banking on a strong recovery in China after its sustained COVID lockdowns to lift commodity prices and boost global demand. But Rio said that while consumption was still improving, weakness in China’s exports and the woes of its property sector are a drag on its economy.
“China’s economic recovery has fallen short of initial market expectations as the property market downturn continues to weigh on the economy and consumers remain cautious despite monetary policy easing,” the company said in its production report on Wednesday.
The miner’s iron ore operations produced 81.3 million tonnes in the second quarter, about 3 per cent more than in the same quarter last year and the fifth straight quarter of growth. Improvements across Rio’s ore mines should see full-year shipments land in the upper half of the miner’s January forecast of between 320 million to 335 million tonnes.
The uptick in iron ore production came despite planned maintenance in its Pilbara operations and a driverless train derailment last month that damaged about 700 metres of track on a key rail line to the Port of Dampier and took three days to repair and reopen.
“We built further momentum in our Pilbara iron ore business for the quarter, and now expect to deliver shipments in the upper half of our guidance range for the year,” Rio’s chief executive Jakob Stausholm said in the quarterly update.
The company reported production was slightly down for another key material, copper – a metal in high demand as the world transitions away from carbon-intensive fossil fuels to low-emissions renewable energy.
Rio is ramping up copper production from its underground mine at Oyu Tolgoi, in Mongolia’s South Gobi Desert, but overall copper production was 1 per cent lower during the quarter – at 145,000 tonnes – because of machinery failures at its Kennecott mine, just outside Salt Lake City in the US, and reduced crusher and conveyor availability at Escondida, the world’s largest copper mine in Chile’s Atacama Desert.
“The ramp-up of the Oyu Tolgoi underground mine progressed ahead of plan, and we remain on track to more than triple its copper production by the end of the decade,” Stausholm said.
The company said bauxite production from its Weipa operation in far north Queensland was 5 per cent lower at 13.5 million tonnes because of higher-than-average rainfall, with full-year production expected to be at the lower end of its 54 to 57 million tonne range.
“Production downgrades during the quarter highlight that we still have much more to do elsewhere,” Stausholm said.
“We continued to take disciplined measures to grow in the materials the world needs for the energy transition, with investments to expand our low carbon aluminium production and increase our underground copper production at Kennecott.”
The dual-listed company’s Australian shares fell 0.8 per cent to $116.
Rio said it is taking practical steps to decarbonise its operations. It has converted an open pit mine to renewable diesel at Boron in the US, signed a memorandum of understanding with Chinese steelmaker Baowu to explore decarbonisation options, and begun BlueSmelting titanium at a demonstration plant at Sorel-Tracy in Quebec.
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