Rio Tinto could raise iron ore production guidance by as much as 7% - analysts

The company's third quarter production report due out Wednesday is expected to reflect improving conditions for steelmakers

SYDNEY (Reuters) - 

World No. 2 iron ore miner Rio Tinto Ltd/Plc (RIO.AX: Quote)(RIO.L: Quote) may be set to lift its 2009 production guidance by as much as 7% to reflect improving conditions for steelmakers, analysts said on Tuesday.

The company's third quarter production report scheduled for release on Wednesday is likely to include an upward revision by as much as 14 million tonnes for iron ore output from the June 16 projection for 200 million tonnes, they said.

Rio Tinto, which ranks behind Brazil's Vale (VALE5.SA: Quote) on iron ore production, was forced to accept price roll backs of 33-44% and prospects of lower shipments this year as global steel makers braced for a dramatic slowing in demand that now may prove short-lived.

Price negotiations between miners and steel mills kick off on Wednesday for 2010/2011 shipments and analysts are tipping increases of up to 15% as steelmakers ramp up operations.

Rio's smaller Australian rival, Fortescue Metals Group (FMG.AX: Quote), already reported third quarter output up 20%, while closer peer BHP Billiton (BHP.AX: Quote) (BLT.L: Quote) also is expected to show higher output when it updates on Oct. 21.

"BHP and Fortescue shipments in the September quarter have been very strong and it's fair to say Rio's will be up as well," said Hong-Kong-based CLSA mining analyst Matthew Whittall.

Rio Tinto's production is more difficult to gauge quarter by quarter because it exports material exclusively from two private ports -- Lambert and Dampier -- on the fringe of the Pilbara iron ore belt. Other miners use public terminals.

Rio Tinto's privately-owned ports and railways in the Pilbara can move about 220 million tonnes, leaving them under utilised and capable of transporting added tonnage.

World Steel Association data shows global steel production ran at an annualised rate of 1.278 billion tonnes in August 2009, up 26% from the low in December 2008. Analysts are expecting year-on-year growth when September tallies are released later this month.

"We expect a strong result from Rio as the company continues to ramp up its production numbers post the global financial crisis," UBS mining analyst Glyn Lawcock said in a client note.

"Importantly, we believe the report may suggest that Rio may need to upgrade its 2009 full year production guidance for iron ore of 200 million tonnes globally," Lawcock said.

Royal Bank of Scotland is expecting a 15% gain in Rio Tinto's second half production over the first half's 98 million tonnes, led by increased tonnages from the its Hamersley division in Australia, leading to 2009 output of about 212 million tonnes. (Editing by Lincoln Feast)

© Thomson Reuters 2009 All rights reserved

Disclaimer

MINEWEB is an interactive publication, with rolling deadlines through each day, commencing in the Sydney morning,  and concluding, 24 hours later,  in the Vancouver evening.  If you believe your side of an issue deserves inclusion, but has failed to meet one of our deadlines, you are invited to notify the Editor in Chief in Johannesburg, and we will include you in our editing and expanding on our stories. Email him at alechogg@gmail.com

Print story      Email story      Subscribe to free newsletter

Back