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Rio Tinto iron ore shipments fall

Apr 21, 2015
Rio Tinto's Sam Walsh

Rio Tinto's Sam Walsh

Rio Tinto’s iron ore shipments have fallen 12 per cent during the March quarter, a period when it was largely blamed for over-supplying and pushing down the price of Australia’s top export.

Rio, the world’s second largest iron ore miner, shipped 72.5 million tonnes for the three months to March, well down on the previous quarter and on expectations of about 80 million tonnes.

The iron ore price went from above $US70 a tonne to below $US50 during that period. It’s still below $US51.

Shipments were up nine per cent on the same period last year.

Deutsche Bank analysts had forecast sales of 82.7 million tonnes for Rio, while UBS’ forecast was for nearly 80 million.

“What it does show you is that it has been very much a demand issue right now causing the iron ore price weakness, not so much excess supply,” UBS analyst Glyn Lawcock told AAP on Tuesday.

While the mining giants have been accused of causing a global iron ore supply glut, BNP chief Asia economist Richard Iley said, China’s egregious real estate over-supply means the outlook for steel demand is weak.

Rio on Tuesday reaffirmed guidance for annual shipments of nearly 350 million tonnes this year which. Its plan to go to 360 million, and with new production from BHP Billiton, Vale and Fortescue, points to more supply coming in the back half of the year.

That worries the Australian government because it could lead to heavier iron ore price falls and a consequent further loss in tax and royalty revenue.

“It comes down to what you think the Chinese government are going to do,” Lawcock said.

China moved to provide economic stimulus last weekend, cutting the level of funds banks must hold in reserve.

Rio chief executive Sam Walsh said the company continued to drive efficiency in all aspects of the business – and that was reflected in a solid first quarter production performance.

It blamed the fall in shipments on tropical cyclone Olwyn and a train derailment, both of which were in the Pilbara.

Rio’s mined copper production fell nine per cent on a year ago to 144,000 tonnes, due to lower grades.

The company’s shares were $1.13, or 2.1 per cent, higher at $55.79 at 1015 AEST.

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