Rio Tinto is heading for sharp slowdown in first half profit growth after revealing bigger than expected falls in iron ore and coal production and exports in the three months to March.
In fact production and sales forecasts for 2011 also show a slowdown in the growth of iron ore, coal, bauxite, alumina and aluminium sales and production, while copper production and sales will be lower as will that of uranium.
Higher prices for iron ore, coal, copper and aluminium will go some way to offsetting the slowing production growth rates and the first quarter falls, but the current price levels are coming under pressure, especially for the company’s most valuable resource, iron ore.
World copper prices continue to weaken, although gold and silver prices are still at high or near record levels.
Certainly the company won’t repeat the surge in earnings it saw in 2010 when interim earnings tripled to $US5.85 billion from $US1.62 billion as higher prices for iron ore boosted the result.
The actual dollar profit is likely to be matched, but the growth will have gone because of the first half weakness and the plateauing in the price of some commodities.
Output of its most important commodity, iron ore, is forecast to be up just 6 million tonnes from 2010, or just over 3%.
Bad weather in Western Australian, Queensland and the top end of the Northern Territory cut production and sales of iron ore, coal and uranium, while the company’s Canadian iron ore pellet business suffered a drop in production as well.
Copper production in South America, Indonesia and the US fell and is expected to decline this year, but output from the Northparkes mine in NSW again rose and is expected to be higher this year.
Chief executive Tom Albanese said in yesterday’s first quarter review "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.
"We have successfully gained control of Riversdale Mining Limited and plan to accelerate the development of these significant tier one coking coal assets."
(That happened last week, just after the end of the quarter.)
Rio said global iron ore production of 42 million tonnes attributable (53 million tonnes on a 100% basis) was down 3% on the first quarter of 2010, but 16% lower than the fourth quarter of 2010.
"Operations in the Pilbara were disrupted by three tropical cyclones and widespread flooding," the company said.
"Capacity of Pilbara iron ore operations increased to 225 million tonnes per annum (Mt/a) at the end of the first quarter, following completion of the first debottlenecking project at the Dampier port".
Mined copper was down 14% on the first quarter of 2010, reflecting lower grades at Escondida and Grasberg, that couldn’t offset a 27% rise in output at Northparkes mine.
Alumina production was down 4% on the first quarter of 2010, primarily due to heavy rains in Queensland. Bauxite and aluminium production were broadly flat.
Severe monsoonal rains led to the declaration of force majeure at the four Queensland coal mines at the end of 2010 and remains in place at Hail Creek.
That saw the company’s Australian hard coking coal production fall 12% on the first quarter of 2010 and 29% on the fourth quarter of 2010.
Rio’s Australian thermal coal production was "consistent" with the first quarter of 2010 as higher New South Wales production offset the Queensland interruptions.
In its iron ore business in the Pilbara in WA, Rio said that first quarter sales of 50 million tonnes (100% basis) were 6% lower than the corresponding quarter of 2010.
"The impact of three tropical cyclones and additional tropical low depression systems caused out-loading operations to be suspended several times during the quarter with the resultant loss of approximately nine shipping days," the company said.
At the Iron Ore Company of Canada first quarter production of pellets and concentrate at IOC fell 20% on the same quarter of 2010, reflecting lower truck availability and a crusher breakdown. All concentrate was used for pellet production, which resulted in zero production of concentrate for sale.
Rio said its 2011, global iron ore production for its Australian and Canadian operations is expected to be 191 million tonnes (Rio Tinto share) and 244 million tonnes on a 100% basis. That compares with 2010 production of 239 million and 185 million on a 100% basis, meaning the company has to boost output this quarter and keep it there for the rest of the year to make this forecast.
Copper production fell at Kennecott in the USA, Escondida in Chile, Palobora in South Africa and Grasberg in Indonesia, but rose at Northparkes.
Rio said its 2011 share of mined and refined copper production is expected to be 539,000 tonnes and 350,000 tonnes, respectively. That compares to 678,000 tonnes of mined copper last year and 359,000 tonnes of refined metal.
In its bauxite, alumina and aluminium business, bauxite production was broadly in line with the first quarter of 2010, with higher production at Weipa mostly offsetting a 10% fall at Gove in the Northern Territory.
"Alumina production decreased by four per cent compared with the first quarter of 2010, mainly attributable to lower
