SYDNEY—Rio Tinto PLC expects to ship less iron ore than
initially thought from its vast network of mines in remote
northwest Australia this year, news that may offer a morsel of
relief for investors and smaller producers worried about an
emerging glut in the raw material.
Although Rio Tinto recorded a rise in quarterly exports, the
Anglo-Australian miner—and the world's second biggest exporter of
the steelmaking ingredient—said severe weather conditions had
hampered operations and meant it would fall short of its earlier
target. Rio Tinto now expects to ship 340 million metric tons of
iron ore in 2015, down from a prior projection of "approaching" 350
million.
"Around seven million tons of shipping capacity was lost
directly at the ports due to uncharacteristically severe weather,"
the company said Thursday.
During the first half of the year, Western Australia's coastline
was battered by strong winds and heavy rainfall from tropical
cyclones Olwyn and Quang. Rio said heavy rains inland had also
slowed down its trucks, "resulting in lost production at the mines
and impacting the ability to rail planned tons."
The miner recorded quarterly iron-ore shipments of 81.4 million
tons, up 8% from a year earlier and 12% from the preceding quarter.
First-half shipments were up 8% from a year earlier at 153.9
million tons.
Rio Tinto, the world's lowest-cost, major supplier of the
commodity, been expanding its network of mines and infrastructure
in Australia's iron-rich Pilbara region, despite a sharp fall in
prices over the past 18 months. It also produces iron ore in
Canada.
Iron ore plummeted to a decade low around US$44 a ton earlier
this month on concerns about rising shipments of ore, at a time
when China's steel market has weakened. It has since recovered to
roughly US$50 a ton, but many analysts say the price is likely to
fall to fresh lows later this year as rising exports, particularly
from Australia—including billionaire Gina Rinehart's new
55-million-ton-a-year Roy Hill mine in Pilbara—saturate the market.
They caution a glut is emerging that will take years to clear.
That is hurting smaller, typically higher cost producers, who
struggle to remain profitable at these levels. In early 2011, the
price had traded as high as US$192 a ton.
Australian producers including Atlas Iron Ltd. and Mount Gibson
Iron Ltd. have slashed costs and laid off staff, citing weaker
prices. Fortescue Metals Group Ltd. Chief Executive Nev Power said
the downturn had "ripped the heart out of the industry."
Rio Tinto has previously rejected calls to stop a multiyear
expansion that will increase its annual exports from Australia to
roughly 360 million tons. On Thursday, it said the key elements of
infrastructure for that expansion had now been built.
It isn't just in iron ore where Rio Tinto has been increasing
production in the face of weak prices. The miner recorded quarterly
hard coking coal production of 2.1 million tons, up 15% from a year
earlier and 5% higher from the preceding quarter, citing rising
output from its Kestrel mine in Australia's Queensland state.
Coal prices have also been languishing at multiyear lows due to
slowing demand and oversupply.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
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