Rio Tinto off to a soft start in 2024 but maintains guidance after iron ore output down in first quarter

Bad weather in the Pilbara has left a big dent in Rio Tinto’s shipments of iron ore in the first quarter, but the mining major says it is sticking to its full-year forecast. Rio shipped 78 million tonnes of the steel-making commodity between January and the end of March — down 5 per cent on the same period a year earlier and a 10 per cent decrease from the final quarter of 2023. It blamed the fall in volume on weather disruptions at its ports, along with a fall in production. Total production dropped 2 per cent to 77.9mt, an 11 per cent decline from the previous quarter, with planned ore depletion — mainly at Yandicoogina — only partially offset by productivity gains across other operations. The mining giant has been using higher volumes of its lower-grader SP-10 product to supplement production while it battles with the mining approvals process to bring online the next generation of its Pilbara iron ore mines. SP10 levels are expected to “remain elevated” until replacement projects are delivered, Rio told investors on Wednesday. The company said construction of its majority-owned Western Range mine is now more than 50 per cent complete with first ore from the $3.1 billion project on track for 2025. Its suite of other Pilbara replenishment developments — Hope Downs 1, Brockman 4, Greater Nammuldi and West Angelas — still remain “subject to timing of approvals and heritage clearances”. Despite the weaker quarterly output Rio is maintaining full-year shipment guidance of between 323mt and 338mt. Production costs are also expected to remain at between $21.75/t and $23.50/t. Iron ore prices have showed renewed strength in recent weeks after briefing flirting with a dip below $US100/t on expectations China’s steel industry is primed for a rebound even though the Middle Kingdom’s property sector continues to struggle. Prices are now perched around the $US110/t mark and Rio was bullish on the demand outlook from key customer — China. “Steel exports rose 30 per cent year-on-year during the first two months and are likely to remain historically elevated, in turn, supporting iron ore demand,” it said. “China’s economic recovery has been uneven, prompting more government support to sustain growth and meet the target of around 5 per cent GDP growth this year.” Amid the optimistic outlook analysts were relatively unperturbed by Rio’s quarterly production decline. UBS’ Lachlan Shaw said iron ore shipments of 78Mt were “broadly in line” with consensus of 79Mt and noted the price of the steelmaking commodity is holding up. RBC Captial’s Kaan Peker said the iron ore production miss was “not significant” and believes the issues are isolated to the first quarter. However, he noted the SP10 volumes accounted for 18 per cent of shipments during the quarter, against RBC’s expectations of around 15 per cent. Rio also reiterated to investors on Wednesday its share of the Simandou project in the West African country of Guinea will cost approximately $US6.2 billion, with first production still on track for next year. Shares in Rio Tinto were trading down 0.4 per cent at noon.