Rio Tinto beats export record in strong start to the year
Rio Tinto began the year with a record March quarter of iron ore exports, but it has already cut future guidance.
Rio Tinto has warned that high inflation rates in the developed world is a major risk to global growth, despite the company flagging a brightening outlook for commodity markets on an improving economic outlook in China.
Rio’s warning on the global outlook comes as the company kicked off the year with a record quarter of iron ore exports, shipping 82.5 million tonnes for the March quarter, up 16 per cent on the same period in 2022.
And strong iron ore prices for the quarter already look set to boost the company’s first half results, with the benchmark iron ore price averaging $US125 a tonne over the period, a 27 per cent improvement on the December period.
The improving outlook in China boosted blast furnace use rates to more than 90 per cent in the quarter, which Rio said was a seasonal record with the country’s steelmakers importing 309 million tonnes of iron ore for the period – 9 per cent above the first three months of 2022.
But the broader global economy still risks being undermined by persistently high inflation rates, particularly in Europe, Rio told shareholders.
“However, inflation remains persistently high in the western world, and the risk of further rate hikes on the global economy remains. The potential banking crisis has led to further tightening of conditions both in terms of credit availability and costs, which will weigh on economic activity across the board,” Rio said on Thursday.
“The eurozone economy continues to be challenged by weak manufacturing activities and high core inflation, as manufacturing output and new orders fell, while services showed an expansion. Correspondingly, core inflation has been pushed up by services, whilst manufactured goods inflation has tapered down.”
Rio released its first quarter production report on Thursday, saying its Pilbara mines had produced 79.3 million tonnes in the quarter, 11 per cent on the first three months of 2022, with the company drawing down on stockpiles to push up shipments further.
But mine production was down 11 per cent on the December quarter after materials handling issues and outages at its plant hit production at its Yandicoogina mine and the Robe Valley operations.
Output from Yandicoogina was down 10 per cent for the quarter to 13.7 million tonnes, with Robe Valley operations down 25 per cent to 3.1 million tonnes.
The 330 million tonne run rate puts Rio’s flagship division firmly towards the top end of its 320 to 335 million tonne annual guidance, from a quarter traditionally affected by cyclone season.
Combined, output from Yandicoogina and Rio’s Robe River operations were about 2.5 million tonnes below December quarter levels, suggesting the company would easily have broken through the top end of its guidance range on an annualised basis had the problems not occurred.
Rio left its export and cost guidance unchanged, saying it still expected cash unit costs to average $US21 to $US22.50 a tonne for the year.
Chief executive Jakob Stausholm said the company was making “steady progress” to restore Rio’s reputation as the sector’s best operator, saying the company’s focus would be on sustaining the improvements over the rest of the year.
But the company has already cut its copper guidance, saying bad weather at its Kennecott mine in the US and the failure of equipment had slowed output of mined copper by 36 per cent for the quarter, to 30,300 tonnes.
Rio cut its annual copper guidance from 650,000 to 710,000 tonnes down to 590,000 to 640,000 tonnes, saying the decision reflected the troubles at Kennecott as well as “geotechnical challenges” from its open pit at the giant Escondida mine.
The mining giant said its entry into the lithium space may cost more than initially expected, as it rejigs the numbers at its Rincon lithium project in Argentina. The company’s initial $US140m estimate for a starter plant at the project is now under review, Rio said on Thursday, “in response to significant local inflation and cost escalation for equipment”.
Rio shares closed down $2.86, or 2.3 per cent, to $120.33 on Thursday.
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