Rio Tinto Intends to Make Up Lost Bauxite Output — Commodity Comment

Rio Tinto PLC on Thursday said it produced 11% more Pilbara iron ore and 7% more aluminum in the first quarter versus a year earlier. Copper output was flat and bauxite production fell by 11%. Here are some remarks from the miner's quarterly production report.

On the aluminum market:

"The LME cash aluminium price declined by 1% over the quarter, although the average price of $2,395 [a metric ton] was 3% higher than the fourth quarter of 2022. Global ex-China aluminium demand ended 2022 on a weak note, while China's aluminium demand has improved over the quarter. Chinese reported inventories have declined steadily since their peak in early March, and hydropower constraints due to low reservoir levels in Southern China have prevented any smelter restarts."

On its bauxite production:

"Bauxite production of 12.1 million tons was 11% lower than the first quarter of 2022 as our Weipa operations were affected by higher-than-average rainfall during the annual wet season. This resulted in reduced pit access, speed limits for mobile equipment and stockpile bottlenecks due to port closures. Production was further affected by equipment downtime at both Weipa and Gove. We have maintained our bauxite production guidance at 54 to 57 million tons as we implement plans to recover lost production at both sites through the remainder of the year. The weather-related port closures at Weipa had a disproportionate impact on our third-party shipments."

On the copper market:

"The copper LME price rose 7% over the quarter to $4.05 [a pound], driven by a shift in sentiment associated with improved expectations on copper demand from China after the end of its zero-Covid policy. This was reflected in a significant increase in net long investor positions in January. Despite a weaker dollar, concerns over interest rate hikes and fears of a bank crisis led to increased price volatility in March. Conversely mine supply disruptions in Chile, Peru, Panama and Indonesia provided support to prices."

On its copper output:

"[At Kennecott] mined copper production was 36% lower than the first quarter of 2022 due to a combination of record snowfall (twice the historical Utah average) and a failure in early March of motors that drive a conveyor belt that feeds crushed ore to the concentrator. The concentrator is expected to operate below full capacity until the third quarter of 2023 as contingencies are implemented while replacement conveyor motors are sourced (reduced conveyor rates supplemented with trucking of material). Kennecott is also managing heightened geotechnical and flooding risk associated with spring melting of the snowpack.

"[At Escondida] mined copper production was 6% higher than the first quarter of 2022 due to 10% higher concentrator throughput rates, which returned to normal levels after the corresponding quarter in 2022 included impacts from the Covid-19 pandemic and extended plant maintenance. During the quarter, mined copper production was impacted compared to plan by geotechnical challenges in the open pit. Mining has been resequenced, with continued optimisation of the pit in light of the geotechnical risk.

"[At Oyu Tolgoi] mined copper production on a 100% basis increased 41% from the first quarter of 2022 due to concentrator maintenance in the prior period and higher copper head grades (0.49% vs. 0.40%). First sustainable underground production was achieved during the period."

On the iron-ore market:

"Iron ore prices increased 8% over the quarter, while the average monthly price of $125/dry ton (Platts CFR 62% Fe index) was higher than the fourth quarter of 2022 by 27%. The major iron ore producers' combined shipments also rose 4% over the same period, while Chinese steelmakers ramped up their blast furnace capacity utilization rates to more than 90%, a seasonal record. China's iron-ore imports hit a record 309 million tons in the first quarter of 2023, effectively unchanged from the volume imported during the prior quarter and 9% more than the first quarter of 2022. Port inventories briefly exceeded 140 million tons, but subsequently drew back down toward their 130 million-ton level as at the beginning of the year."

On its iron-ore output:

"We produced 79.3 million tons (Rio Tinto share 67.3 million tons) in the first quarter, 11% higher than the corresponding period of 2022, with steady improvements across the system. The ramp-up of Gudai-Darri continues to progress well. Shipments of 82.5 million tons (Rio Tinto share 69.7 million tons) were a record for the first quarter and 16% higher than the first quarter of 2022 with stronger mine production and a drawdown of stocks. The Robe Valley Circuit and Yandicoogina mine were impacted by plant reliability and materials handling issues during the quarter."

On the lithium market:

"The electric-vehicle sector remains robust, albeit with falling growth rates from a higher base. Lithium carbonate spot prices fell sharply over the quarter, driven by the termination of the EV cash subsidy and a price war in China's auto market. Short-term uncertainty remains as the global economy slows and rising interest rates dampen consumers' discretionary spending. Nevertheless, the long-term outlook remains favorable as governments continue their push for EV adoption."

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

(END) Dow Jones Newswires

April 19, 2023 20:04 ET (00:04 GMT)

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