Singapore — Mining giant Rio Tinto has cut its 2019 iron ore shipment guidance as it continues to deal with issues caused by a cyclone which had hit Western Australia during the January-March quarter, the company said in its quarterly report Tuesday.
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"Our iron ore business faced several challenges at the start of this year, particularly from tropical cyclones. As a result, and following the continuing assessment of damage at the port resulting from the cyclones and other minor disruptions, 2019 guidance for Pilbara shipments is reduced," the company's chief executive J-S Jacques said.
The company's guidance for this year is now pegged between 333 million mt and 343 million mt on a 100% basis, which is down from its previous 338 million-350 million mt expectation, Rio said, citing a slower than expected ramp-up and the ongoing disruptions. Recovery work to port damage caused by tropical cyclone Veronica was further hindered by tropical cyclone Wallace, the company said.
The return to normal operating levels will remain subject to weather conditions in the current quarter, it added.
Rio declared force majeure on sales of some iron ore fines in the first week of April, adding to the supply squeeze that had propelled the S&P Global Platts 62% IODEX benchmark to be assessed near a five-year high of $95.80/dry mt CFR China on April 12. The benchmark was last higher on July 17, 2014 when it was assessed at $96.25/dry mt.
RBC Capital Markets analyst Paul Hissey said: "Lower iron ore shipments were expected following recent announcements, though today's result points to the potential for additional downside for 2019." He added that RBC is expecting Rio's iron ore shipments to be at the lower-end of its updated guidance -- at 334 million mt.
Rio said earlier this month that it expected a 14 million mt loss in production, which would have placed it at the lower end of its previously expected shipment guidance.
In the January-March quarter, total shipments from Rio's Western Australian iron ore assets were 69.1 million mt, which was down 14% year on year and 21% from the October-December quarter.
Total production stood at 76 million mt, down 9% year on year and 12% quarter on quarter. Robe Valley Lump and Fines production took the biggest hit. Rio's share of Robe Valley Lump production was 0.6 million mt, down 60% year on year and 55% quarter on quarter. Robe Valley Fines dropped to 1.2 million mt, down 60% year on year and 52% from the October-December quarter.
Pilbara Blend Lump output fell to 20 million mt, down 4% year on year and 8% quarter on quarter, while Pilbara Blend Fines stood at 28.8 million mt, down 3% from the year before and 9% from the previous quarter. Yandicoogina Fines fell to 13.5 million mt, also showing a 3% year on year fall and 9% quarter on quarter decline.
The miner said that about 16% of its sales in the quarter were priced according to the prior quarter's average index lagged by a month, while the remainder was sold on the average in the current quarter, current month average or on the spot market.
IOC POSTS PRODUCTION INCREASE DESPITE WEATHER ISSUES Rio's Iron Ore Company of Canada overcame adverse weather disruptions in February to post a year on year increase in production during the January-March quarter, it said.
Rio's share of iron ore pellets and concentrate production from IOC's business was 2.5 million mt during the three-month period, which is up 5% year on year, but down 13% from the October-December quarter, it said.
This was made up of 2.7 million mt of total pellet production, whereby Rio's share was 1.6 million mt, which was 2% higher year on year. Concentrate production which was sold stood at 1.5 million mt, whereby Rio's share was 0.9 million mt, up 11% from the year ago, the company said.
IOC's iron ore pellets and concentrates output guidance for 2019 was unchanged at between 11.3 million mt and 12.3 million mt, it added.
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