Sydney: Global miner Rio Tinto on Wednesday forecast iron ore production to roughly meet market expectations for the full year, despite rain and cyclones denting output of its most valuable commodity in the first quarter.
The world’s second-largest producer of the steel-making raw material reported a 3% fall in production for the March quarter, after cyclones battered its Pilbara operations in northwest Australia early this year.
Its production of hard coking coal, also used in steel-making, tumbled 12% in the first quarter from a year earlier, though this had been expected after major flooding in the country’s main coking-coal region of northeast Australia.
“Our Australian coal, iron ore, uranium and alumina operations were affected by the extreme weather in the first quarter, but most are recovering and are benefiting from continued strong prices,” chief executive Tom Albanese said in the company’s quarterly production report. But the company is still not completely recovered, with the last of four of the hardest-hit coal operations, its Hail Creek mine, still under a declaration of force majeure.
Close rival BHP Billiton flagged in January that the Queensland floods will hit sales and production of its coal mining operations through the first half. BHP reports quarterly production figures 20 April.
Rio Tinto forecast its iron ore production for 2011 to total 191 million tonnes, roughly in line with market expectations. Taking into account shares of production from joint venture partners, the total for 2011 rises to 244 million tonnes, Rio Tinto said.
“They’re obviously going to be operating Q2, Q3 and Q4 at much higher levels than last year, and they need to given tight market conditions,” said ANZ Bank analyst Mark Pervan. “Particularly with China again being the key story.”
Albanese also said he expects commodities prices to continue to power higher this year, which would help soften the impact of lost first quarter production.
In iron ore, quarterly contract prices increased by 20% from the March to the June quarter of 2011, following an increase in spot market prices.
The Steel Index’s 62% benchmark fell $1.1 to $181.9 per tonne, $10 off the record high hit in February.
Prices of coking coal have risen sharply since the floods, while copper is just 5% off the record hit in February.
Mined copper was down 14% on the first quarter of 2010, reflecting lower grades at Escondida and Grasberg that had been flagged previously. Rio Tinto holds minority stakes in Escondida and Grasberg, operated by BHP Billiton and Freeport McMoran respectively.
Alumina production was down 4% in the first quarter primarily due to heavy rains in Queensland, while bauxite and aluminium production were broadly flat.
The aluminium supply and demand balance is increasingly swinging in favour of producers, which is being reflected in rising prices for metal -- up around 8% this year.
In coal, Rio forecast its Australian hard coking, semi-soft coking and thermal coal output for 2011 at 9.3 million tonnes, 3.2 million tonnes and 18.2 million tonnes, respectively.
The production report did not make a major impact on Rio Tinto’s Australian shares, which were already underperforming the market before the release of the production data. Its stock closed down 1.3% at A$85.71.