Rio Tinto boosts iron ore concentrates sales over pellets as global demand shifts

Miner Rio Tinto said it is producing more iron ore concentrate at majority-owned Iron Ore Company of Canada (IOC) to meet shifting global market demand, after sales and output of pellets and concentrate rose in the first quarter.

Rio Tinto is working with the government of Quebec to comply with the directive to slow down non-critical projects and activities in the province, which exports IOC's iron ores produced in Newfoundland and Labrador, the company said in a report late Thursday.

IOC sales rose 33% year on year to 4.7 million mt in Q1, with shipments of concentrates almost doubling to 1.7 million mt in the period from Q1 2019, on a 100% operating basis.

Production of pellets and concentrate rose 3% to 4.4 million mt, with output of concentrates rising at a slightly faster rate than for pellets.

Historically weak contract iron ore pellet premiums for Q1, and persistently weak steel margins since mid-2019 along with competition between iron metallic with ferrous scrap, have reduced incentives to produce blast furnace and direct reduction pellets.

Iron ore concentrates are increasingly in demand to benefit sintering, and to be ground into pellet feed, with China a ready spot buyer to supplement domestic concentrates.

"Demand in China continues to recover. In the rest of the world, the outlook is more uncertain," Rio Tinto said in the statement.

In China, Rio Tinto's portside iron ore trading trial is continuing, with sales surpassing 1 million mt, it said.

Rio Tinto's SP10 iron ore fines sales, which fell 29% to 1.09 million mt in Q1, included IOC product blended in and sold at the port, it said.

"Demand for the high-quality iron ores we produce remained strong in the first quarter of 2020, mainly driven by a combination of seaborne supply disruptions and solid demand from China's steel mills despite COVID-19 impacts."

Steel output fall

Since March, lower revised steel output plans from steel producers such as ArcelorMittal and Nippon Steel has cut into iron ore demand outside China.

Steel mills have been forced to act on weaker steel demand as the coronavirus outbreak spread from China into other Asia and Atlantic markets in the past two months.

Indian steel production has been throttled by wide ranging curbs affecting ports and logistics, with auto output declines leading mills in Europe and the US to idle furnaces.

Rio Tinto's Pilbara iron ore shipments rose 5% to 73 million mt on a 100% operating basis in Q1, after strong recovery across the network in March following disruption from tropical cyclone Damien in February.

Rio Tinto said metals mining operations are continuing to work with customers to fulfil orders and meet requirements, while complying with government directives.

"Commodity supply is being disrupted as COVID-19 restrictions impact supply chains and people movement globally," the company said.

The group has changed rosters at iron ore operations, construction and exploration projects, leading to fewer crew changeovers at sites and operations centers to reduce the risk of transmission.

The majority of Pilbara iron ore operations employees and critical contractors on national fly-in-fly-out arrangements have been relocated to Western Australia, it said.

Last month, Australian states introduced quarantine controls and travel restrictions, leading miners to look into staffing procedures to adapt.