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Here’s why Rio Tinto will ship less iron ore despite China demand boost
Australian iron ore miners Rio Tinto (ASX: RIO-AU) and Fortescue (ASX: FMG-AU) released diverging quarterly production data on Thursday, even as China 's demand continued to support prices of the steelmaking material.
Iron ore giant Rio Tinto on Tuesday lowered its 2016 guidance for iron ore shipments citing "port and rail maintenance" during the quarter. The company now expects to ship 325 million to 330 million metric tons in 2016, down from its earlier guidance of 330 million tons.
The world's second-largest producer of the iron ore said third-quarter shipments from Australia dropped 2 percent on-quarter and 5 percent on-year to 80.9 million tons. Production guidance for 2017 was left unchanged at 330 million and 340 million tons.
Spot iron ore was at $58 a ton on Thursday, the highest in more than a month and 50 percent above from all-time lows around $38 at the end of 2015.
Despite concerns over demand for the metal earlier this year, iron ore prices have been picking up on Chinese demand as government stimulus held up market sentiment. China is the world's largest importer of iron ore.
"Iron ore and steel markets continued to be supported by infrastructure and housing activity in China during the September 2016 quarter," smaller Australian miner Fortescue Metals Group said in its production guidance that was also published on Thursday.
Fortescue boosted iron ore shipments by 5 percent on-year and 1 percent on-quarter in the September quarter to 43.8 million tons, "consistent with guidance," it added. It kept its guidance for fiscal 2017 at 165 million to 170 million tons.
Rio Tinto and Fortescue released their production outlook a day after rival BHP Billiton (ASX: BHP-AU), which kept its guidance steady, while flagging budding signs of recovery in the long downtrodden commodities market.
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