More cuts at Rio Tinto in Australia and Canada and down went the company’s shares as the recent optimism about metal prices and the Chinalco deal evaporated.
Rio shares plunged by nearly $6, or 10% to $53.18.
The fall continued right to the end of trading.
They had touched a day’s low of $53 in the afternoon. They had touched $53.18 after the statement was released around 11 am. That was a 9%-plus fall.
The news shows that the hopes of better prices and a better outlook for aluminium have been mistaken, while the recent surge in copper prices, is starting to fray around the edges.
In addition iron ore prices on the unofficial spot market are now back at their low points for almost six years.
Rio was reported yesterday as offering a temporary 20% cut to Asian buyers to get negotiations for 2009-10 contracts back on the tracks.
We got a better view of the outlook for the metal when Alcoa revealed its first quarter results overnight in the US. They were not good.
Rio said yesterday its Alcan aluminium arm will cut back on an expansion project and reduce bauxite production at two separate sites, resulting in the loss of around 700 jobs, including 135 full time positions and about 570 contractors.
Poor prices have forced the decision to slow construction of the Yarwun alumina refinery expansion in Gladstone, Queensland, and cut 2009 bauxite production at the Weipa mine 20% to 15 million tonnes, from 19.4 million tonnes.
Alcan said around 100 permanent roles at Weipa and approximately 570 contractor roles in Gladstone will go, as well as 35 permanent roles will be lost from the Yarwun refinery and at Boyne smelter, which is also in Gladstone.
Rio Tinto Alcan Bauxite and Alumina president Steve Hodgson said in yesterday’s statement that the depressed market meant the "further tough decisions" were necessary.
"Even with alumina industry capacity cuts equivalent to 21 million tonnes per year since the beginning of the crisis, including cuts of 12 million tonnes made since January, there is still little improvement in the alumina price," he said.
He said that "At current prices around 70% of the industry is currently operating at a financial loss.
"At current prices around 70 per cent of the industry is currently operating at a financial loss," Mr Hodgson said.
"Work on the Yarwun alumina refinery expansion will be slowed to reduce the rate of capital expenditure. The change to the construction schedule will result in a revised completion date in the second half of 2012."
Rio said Yarwun was 27% built. It’s one of the projects Chinalco will buy into if its deal is approved.
Mr Hodgson said cost reduction and cash conservation initiatives were being implemented across all Rio Tinto Alcan business units and operations.
"We are strongly focused on minimising costs and conserving cash, and this work is ongoing in our operations as we continue to closely monitor market conditions," he said.
He said the company would ensure all impacted employees receive their full entitlements and have the support and assistance they need in the coming weeks.
And in a separate announcement, a Canadian subsidiary of Rio Tinto said it would temporarily lay off 1,800 workers in Quebec province as it briefly shuts down operations, starting in early July.
QIT-Fer et Titane said its Sorel-Tracy metallurgical complex and Havre-Saint-Pierre mine operations would be "temporarily suspended" from mid-July to late August or early September.
The company is a leading producer of titanium dioxide feedstock and high-quality iron, steel and metal powders.
The company said in a statement the stoppage was required due to "market uncertainty and the global financial crisis".
And the cuts continued in the resources sector yesterday with mineral sands miner, Iluka Resources Ltd announcing the cutting of 135 jobs in Western Australia after slashing forecast output this year because of weak demand for its products.
Iluka will cut its 2009 zircon production by 20% to 350,000 tonnes and reduce the combined rutile/synthetic rutile output by about 10% to match short term demand estimates.
The production cut will result in the loss of 135 jobs from Iluka’s WA operations, the company said in a four page statement to the ASX.
The news sent the shares down; they closed weaker, off 11%, or 42c at $3.41.
"Iluka believes that, in the current environment, lower prices will not increase demand and the prudent course of action is to match current production to a lower estimate of forward demand," Iluka managing director David Robb said in the statement.
"Iluka has commented on a number of occasions that it will, if necessary, respond to a softening in demand for its products associated with the global economic crisis by reducing production in the short term.
"This is particularly the case in zircon where Iluka is the largest global supplier in a relatively small market.
"We have said previously that we expected a slow start to the year. In what is usually a low sales quarter, Iluka’s sales volumes at 190 thousand tonnes were well below expectations.
"It is now clear that demand recovery is taking longer than both Iluka and some of its key customers expected."
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