Rio Tinto has warned that iron ore shipments will come in at the lower end of its guidance, after third-quarter ore deliveries fell amid weak demand in China and the rest of the world.
Iron ore prices are nearly their lowest in three or four years, while China and Europe cut steel output because of growing supply, plus the mining giant has been battling a surge in production costs.
Weakness in prices and cooling China demand, because of a prolonged crisis in the property sector, caused Rio to more than halve its interim dividend payout in July.
The miner said it now expects annual iron ore shipments at the low end of its forecast range of 320 million tonnes (Mt) to 335 Mt. It said the company’s outlook depends on ramping-up the Gudai-Darri and Robe Valley projects, and the availability of skilled labour.
“Rio Tinto’s recovery in iron ore and maintaining the annual guidance should come as a relief to investors, even if it is most likely going to only hit the low end,” analysts at RBC Capital Markets said.
Rio shares reversed their initial gains and were last down 0.5%, compared to the benchmark index’s 1.3% jump.
The world’s biggest iron ore producer shipped 82.9 Mt of the steel-making commodity in the three months to September 30, compared with 83.4 Mt a year earlier.
Rio, however, said that on a quarter-on-quarter basis, shipments rose 4%, despite two rail outages, including one on the Guidai-Darri line.
The company raised annual cost estimates for copper to between 150 cents and 170 cents per pound from 130 cents to 150 cents a pound, but lowered its annual refined copper production guidance to 190,000 to 220,000 tonnes, from 230,000 to 290,000 tonnes.
It also lowered its capital investments for 2022 by $500 million to $7.0 billion, due to a stronger US dollar and “reassessment on timing of decarbonisation investment”.
Separately, Rio said it would “modernise” a nearly 50-year-old agreement with Wright Prospecting to develop the Rhodes Ridge iron ore project, and aims to operationalise a plant by the end of the decade, with an initial annual capacity of up to 40 million tonnes.
Rio last month said it would team up with China Baowu Steel Group to develop an iron ore project for $2 billion as it looks to prop up its production from the Pilbara region.
- Reuters with additional editing by Jim Pollard