Despite the sharp fall in global iron ore prices, mining giant, Rio Tinto (RIO) kept its Western Australian iron ore production and selling machine operating at full bore in the six months to June 30.
Rio said in its June quarter production report, issued this morning, that it had record first half iron ore shipments, production and rail volumes. Iron ore is Rio’s major business, well ahead of coal, copper and other commodities. We will have more on those tomorrow.
"Shipments from the Pilbara exceeded production as stocks built ahead of the delivery of the expanded infrastructure were drawn down, while existing mines continue to be expanded to utilise increased rail and port capacity."
The company said its worldwide iron ore production of 139.5 million tonnes and global shipments of 142.4 million tonnes all set new first half records. Rio Tinto’s share of production in the half was ten per cent higher than in the same period of 2013.
First half production of 132.4 million tonnes (Rio Tinto’s share was 105.7 million tonnes) was 11% than the same period in 2013 and also set a new first half record.
RIO 1Y – Rio ramps-up iron ore
Rio said the improvements were "driven by productivity improvements and the ramp up to the 290 million tonnes a year run rate achieved in May, two months ahead of schedule."
June quarter production was 69.1 million tonnes (Rio Tinto share 55.2 million tonnes) which was also 11% above the same period last year. "A significant proportion of the additional tonnes have gone directly into Pilbara Blends, the largest traded iron ore products by volume and the industry reference iron ores in Asian steel markets," Rio said.
"Record first half sales of 136.1 million tonnes (100 per cent basis) were 22 per cent higher than the same period of 2013. Sales in the first half continued to exceed production due to the drawdown of stockpiled iron ore inventory built at Pilbara mine sites in previous years to facilitate a ramp up of the expanded port and rail facilities to 290Mt/a.
"The growth of our Pilbara iron ore business has enabled us to deliver additional Pilbara Blend iron ore volumes to Asian steel markets, providing our customers with reliable, long-term supply of stable quality. Our Yandicoogina and Robe Valley products remained in high demand from major steel mills in Asia.
"Approximately 25 per cent of sales in the first half of 2014 were priced with reference to the prior quarter’s average index lagged by one month."
The remainder was sold either on the current quarter average, current month average or on the spot market.
"Second quarter sales set a new quarterly record of 71.8 million tonnes (100 per cent basis), 27 per cent higher than the same period of 2013," Rio said.
With global prices down more than 30% over the first six months (and most of the drop occurring in the June quarter), Rio Tinto will be battling to match 2013’s solid revenue and earnings from its most important commodity.
But with the figures from rival Fortescue last Friday for the June quarter, half year and full year, its clear our big iron ore groups are not letting the slide in the price stop them from boosting production and sales.
At the same time Rio says its continuing to cut costs and there was no talk this morning about capital management measures in early 2015. Perhaps that will come in later briefings on Wednesday.
