rio_tinto_logoLargest mining company Rio Tinto would predict an increase in iron ore demand from steel makers. Therefore, Rio Tinto will increase iron ore production of 7.5 percent. Rio Tinto iron ore will produce up to 210 million to 215 million metric tons in the second and third quarters. Production of iron ore was sourced from iron ore mining operations in Australia. The estimate assumes seasonal weather won’t disrupt output, it said. Sam Walsh, the iron ore unit chief, previously predicted 200 million tons of production.

“They are increasing their output because the demand from steelmakers, especially in China, is growing,” Nick Hatch, an analyst at ING Groep NV in London who rates Rio a “buy,” said today by phone.

Steel companies are resuming output at mills in China, the largest consumer of iron ore, Europe and the U.S. as economies recover. Baoshan Iron & Steel Co., the listed unit of China’s biggest steelmaker, is running at full capacity, it said on Aug. 31. ArcelorMittal, the world’s largest, said in July it was restarting blast furnaces in Europe as customers restock.

Iron ore imports by China jumped 30 percent to a record 64.6 million tons last month, the nation’s customs office said today. The global steel market has bottomed and will grow 9.2 percent next year as demand rebounds in the U.S., Europe and Japan, the World Steel Association said on Oct 12.

Rio’s third-quarter output of iron ore, the biggest profit contributor in the first half, rose 12 percent to a record 47.5 million tons, from 42.4 million tons a year before, it said.

Recovery in Place

“Things are improving and they are repositioning their business,” said Tim Schroeders, who helps manage $1.1 billion including Rio shares at Pengana Capital Ltd. in Melbourne. “When you start to see significant lifts in production it is a sign of confidence” that “the recovery is in place.”

Rio rose 150 pence, or 5.3 percent, to close at 2,998 pence on the London Stock Exchange. The shares have more than doubled this year as commodity demand and prices rebounded.

“We are seeing early signs of a recovery in some of our key markets, although we remain cautious about the near term outlook,” Chief Executive Officer Tom Albanese said in the statement. “Cost reductions continue apace and we have made considerable progress on divestments this quarter enabling us to further reduce net debt.”

Albanese in June spurned a $19.5 billion investment from Aluminum Corp. of China in favor of raising $21 billion from a share sale and an iron ore venture with BHP Billiton Ltd. The company has announced $7 billion of asset sales to help pay debt, including its packaging unit, Latin American iron ore and potash deposits and coal, gold and zinc mines in the U.S.

Copper Output

Rio, the world’s second-largest exporter of iron ore, said on Sept. 4 it was shipping the material to China at a price based on the 33 percent discount agreed with Japanese, South Korean and Taiwanese mills. Rio sold 50 percent of its iron ore on the so-called spot market in the first quarter.

Rio’s mined copper output gained 24 percent from a year earlier to 198,000 tons after more metal was retrieved at Kennecott Utah Copper and Grasberg in Indonesia, the world’s second-largest copper mine, the company said.

Aluminum output dropped 4 percent to 956,000 tons, it said. The company said last month it would halt smelting at a 148,000- ton-a-year Anglesey aluminum plant in North Wales after its energy contract ended. Output of hard coking coal, also used in steelmaking, slipped 5 percent to 2.1 million tons.

source : bloomberg.com

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