Rio Tinto Expects Increased Iron Ore Output in 2nd Half -- Commodity Comment

Rio Tinto PLC on Wednesday said first-quarter Australian iron-ore shipments declined. It also reported a decline in aluminum production year-on-year, but an increase in mined copper output. Here are some remarks from its quarterly operational report.

On iron-ore market:

"Iron-ore prices have been volatile, with the Platts 62% Fe index up 33% at the end of the first quarter ($158/dry metric ton). Since late February, supply concerns due to the war in Ukraine has outweighed muted demand growth and a crackdown on speculative trading behaviour in China. China's economy is getting a boost with infrastructure spending, but Covid-19 lockdowns pose downside risks to near-term construction activity."

On iron-ore output:

"Pilbara operations had a challenging first quarter, as expected, as ongoing mine depletion was not offset by mine replacement projects, with delayed commissioning of Gudai-Darri (first ore still forecast for the second quarter of 2022) and ongoing commissioning challenges at the Mesa A wet plant continuing to impact production ramp up at Robe Valley. Covid-19 constraints impacted labor supply as we experienced increased cases on-site in the Pilbara following the Western Australian border opening in March. We expect increased production volumes and improved product mix in the second half with the commissioning and ramp up of Gudai-Darri, commissioning of the Robe Valley wet plant and improved mine pit health. Full year shipments guidance remains unchanged."

On aluminum market:

"The aluminium LME price was volatile ending up 25% at the end of the first quarter, and above $3,500/ton, supported by disruptions from the Russia-Ukraine war, high energy prices and supply tightness in Europe and China. The price hit a record high of almost $4,000/ton on 7 March as fear gripped the market that supply from Russia will become inaccessible. Tight physical metal markets and low inventory levels have also supported increased market premia across U.S. and Europe during the first quarter.

On aluminum output:

"Aluminium production... was 8% lower than the first quarter of 2021 due to reduced capacity at our Kitimat smelter in British Columbia following the strike which commenced in July 2021. The reduced capacity has been partly offset by the continued stable performance across all remaining smelters, despite considerable challenges related to unplanned employee absences due to Covid-19. Agreement with the labor union and employees was reached in October and preparations continue for the Kitimat smelter to progressively restart from June 2022 with full ramp up expected by the end of the year."

On copper market:

"Copper has not experienced a price rally to the extent seen in other base metals, although the price was up 7% at the end of the first quarter ($4.69/pound). The global market continues to be tight, with exchange stocks near 16-year lows, and is still susceptible to supply disruptions. However, rising global production later in 2022 should help to offset disruptions.

On battery-materials markets:

"Prices for key battery metals have continued to increase as strong demand outpaces supply, amidst low spodumene feedstocks. Lithium carbonate prices have more than doubled in the first quarter and seen a six-fold increase year on year. Nevertheless, mine supply growth should pick up due to the ramp up of idled mine capacity and new projects coming online, especially in Australia."

Write to Rhiannon Hoyle at [e-mail]

(END) Dow Jones Newswires

April 19, 2022 19:54 ET (23:54 GMT)

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