By David Winning 
 

SYDNEY--Rio Tinto PLC said its iron-ore shipments rose by 1% in the three months through June as it capitalized on strong prices of the steelmaking ingredient, although production of other key commodities was mixed.

The miner said it shipped 86.7 million metric tons of iron ore in its fiscal second quarter. Half-year shipments were 3% higher than a year earlier at 159.6 million tons and were achieved despite damage to infrastructure such as access roads, accommodation and power lines caused by Tropical Cyclone Damien in February.

Rio Tinto said it continued to expect annual iron-ore shipments of between 324 million tons and 334 million tons.

Management said it now expected capital expenditure of around US$6 billion this year, narrowing an earlier forecast of between US$5 billion and US$6 billion. That reflected "an appreciation in our major operating currencies against the U.S. dollar since the first quarter and a reduced impact of Covid-19 on both sustaining and development expenditure," the company said.

Iron-ore prices this month topped US$110 a ton after supply from Brazil was disrupted by the spread of the novel coronavirus and demand strengthened in China, the world's top buyer of the commodity. On Thursday, China said its economy grew 3.2% from a year earlier in the second quarter, as authorities benefited from an aggressive campaign to eradicate the virus within its borders.

Mining executives say key indicators, such as utilization rates at steel mills, have recovered to levels before coronavirus pandemic. Steel inventories are also falling from high levels, signaling demand has gotten stronger.

The World Steel Association, an industry group, expects Chinese steel demand to increase by 1.0% this year, despite the early disruption to manufacturing. Infrastructure projects begun this year will also support steel consumption in 2021, it says.

Still, the virus pandemic has forced Rio Tinto to shutter some operations temporarily, reduce output at others, and rethink how it staffs operations that have traditionally relied on open borders to bring in mineworkers from far away.

On Friday, Rio Tinto said capital expenditure for next year and 2022 is expected to be around US$7 billion annually, up from a prior forecast of US$6.5 billion per year. "This includes spend from 2020 that has been rephased as a result of Covid-19 restrictions," the company said.

Among its other commodities, Rio Tinto said quarterly bauxite output rose by 9% to 14.6 million tons while copper production dropped by 3% to 132,800 tons and aluminum output fell by 2% to 785,000 tons.

 

Write to David Winning at david.winning@wsj.com

 

(END) Dow Jones Newswires

July 16, 2020 18:49 ET (22:49 GMT)

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