Rio to Cut Iron Ore Output 10% as China Demand Slows
Rio Tinto Group, the world’s second- largest iron ore exporter, will cut output at its mines in Western Australia by 10 percent because of reduced demand from steelmakers in China, following the lead of bigger rival Cia. Vale do Rio Doce.
“This reduction is a prudent move to align production with revised customer delivery requirements in the light of the fourth- quarter drop in Chinese demand,” Tom Albanese, chief executive officer of the London-based company, said today in a statement.
Albanese said the slowdown will be short, forecasting demand to rebound next year in China, which yesterday pledged a 4 trillion yuan ($586 billion) stimulus plan to prop up growth as the world heads toward recession. Slowing global economies have slashed steel demand, damped prices and slowed exports.
“Rio is facing reality” and its earnings will be reduced significantly this year, Peter Arden, an analyst at Ord Minnett Ltd., an affiliate of JPMorgan Chase & Co., said from Melbourne. He expects contract ore prices may drop 10 percent next year and fall again in 2010. “This is about as bad as it gets.”
Rio Tinto’s shares rose 6.8 percent to A$77.20 at 12:45 p.m. Sydney time. BHP’s shares rose 7.1 percent compared with a 2.2 percent gain in the benchmark index.
China Plan
Steel production in China, the biggest maker of the metal, will rise at least 5 percent next year because of the stimulus package, Daiwa Securities Group Inc. said today. The funds will go toward low-rent housing, rural infrastructure as well as roads, railways and airports.
Spot iron ore prices rose for the first time in six months on Nov. 7, with prices at Qingdao, China’s biggest iron ore port, advancing 3.7 percent to 560 yuan ($82) a metric ton.
Fortescue Metals Group Ltd., Australia’s third-largest iron ore exporter, said today it’s bringing forward a planned shutdown of its port and mine processing plant, reducing production this year by about 10 percent. More normal conditions are expected next year and beyond, the Perth-based company said.
Tags: exports, imports, iron-ore, output, steelPages: 1 2
