Rio Tinto today reported flat June quarter iron ore output from a year ago, while sales fell slightly short of output, putting pressure on its shares and heightening concerns about cooling Chinese demand.
The global miner derives about 80 per cent of its earnings from iron ore and recently committed to spending $3.7 billion towards expanding its Australian iron ore capacity by another 25 per cent, calling iron ore the best-returning commodities business in a tough global environment.
Chief executive Tom Albanese said despite global volatility, the company's expansion projects still stack up.
"Global economic conditions and sentiment dropped markedly in the second quarter," he said in the company's quarterly operations review.
"We are keeping a close eye on the pace of the US recovery, the continuing euro zone crisis and the impact of efforts to stimulate the Chinese economy on the markets that we serve."
Rio Tinto's iron ore production was steady at 48.6 million tonnes in the June quarter, compared with 48.9 million tonnes a year earlier and 45.6 million tonnes in the first quarter."
Iron ore didn't recover as much (from the first quarter) as people had hoped," said JPMorgan analyst Lyndon Fagan.
On a 100 per cent basis, second quarter shipments from its Western Australian iron ore operations were 57.4 million tonnes, compared with production of 58.4 million tonnes.
Smaller rival Fortescue Metals Group earlier reported a 54 per cent jump in production in the June quarter to 19.2 million tonnes from a year earlier and said it was on track to reach 155 million tonnes a year by mid-2013, although its expansion costs had jumped 7 per cent to $9 billion.
Fortescue's sales recovered more sharply in the June quarter than Rio's, which analysts said may disappoint investors.
Weaker steel demand in China had curbed the appetite for iron ore, although a near-record pace of steel production sustained as mills shield their market share is likely to keep demand for the raw material firm longer term.
Reuters
