Ground Breakers: Rio hits its straps in September quarter as iron ore remains curiously strong

Rio Tinto follows up strong iron ore numbers with increased output in aluminium and copper

World’s second biggest miner sees challenges in aluminium, copper, lithium and titanium dioxide demand

But it says China is showing ‘signs of stability’ as iron ore and steel demand remain strong

Rio Tinto (ASX:RIO) has followed up early reports of strong performance in its iron ore division with solid quarterly output in its copper and aluminium businesses in a sign the world’s second biggest mining company is getting a grip on its operational performance.

After years of struggling around guidance in a number of divisions, headlined by its priority Pilbara iron ore operations, Rio is starting to turn a corner and back up its growth ambitions.

Its iron ore division has shipped 245.5Mt in 2023, up 5% on 2022 after a 1% YoY and 6% QoQ lift to 83.9Mt in the September quarter, putting it on track to hit the upper end of its 320-335Mt guidance range.

That has made long term aims of hitting 345-360Mt appear less fanciful, with the miner targeting in the order of four new developments by 2028 to hit its mid-term target, though it will need to rely on increasing sales of lower grade SP10 product to bridge the gap.

But its bauxite (up 2% YoY to 13.9Mt), aluminium (up 9% to 828,000t) and copper (up 5% YoY and 17% QoQ to 169,000t) output was also up in a strong showing.

On the flippity-flip its mineral sands and high grade iron ore output disappointed. Titanium dioxide slag output fell 20% YoY and 19% QoQ to 247,000t and is now off 5% to 835,000t over the first nine months of 2023.

Its Iron Ore Company of Canada division saw production fall 14% YoY to 2.4Mt. Down 10% to 7Mt YTD, the North American magnetite ops hit by plant downtime, conveyor failures and Northern Quebec wildfires will reduce their guidance from 10-11Mt to 9.3-9.8Mt for 2023.

Rio CEO Jakob Stausholm said the $171 billion miner, up almost 3% today on higher iron ore prices and its results release, was also making headway on its efforts to build its critical minerals portfolio.

Iron ore prices in Singapore settled higher at US$119.10/t on Monday.

“We delivered another quarter of progress and maintained momentum at our Pilbara iron ore operations. We continued to make good headway ramping up our Oyu Tolgoi high-grade underground copper mine, our Kitimat aluminium smelter returned to full production, and we safely restarted the smelter and refinery at Kennecott after completing the largest rebuild in its history,” he said.

“We have more to do as we work towards sustainable performance improvements across our business.

“We took real steps to build our portfolio of materials needed for the future, signing agreements that will see us take a leading position in recycled aluminium in North America and agreeing to enter a joint venture with Codelco to explore for copper in Chile. We also completed further infrastructure agreements with our partners for the world class Simandou iron ore project.

“We are making strong progress towards building the Rio Tinto of the future, striking a balance between disciplined performance in evolving market conditions, investing to generate valuable long-term growth and delivering attractive shareholder returns.”

Rio Tinto (ASX:RIO) share price today

Signs of stablility

With China still far and away the largest steel market on the planet, Rio continues to be highly wedded to its economic growth as the world’s biggest shipper of seaborne iron ore.

The company says three year low portside iron ore stocks of 114Mt at the end of the September quarter, underpinning a 7% rise in prices, came off the back of strong domestic steel demand and crude steel exports, up 1% and 40% respectively.

That came despite an 8Mt rise in overall iron ore supply on sea freight routes, largely out of Australia and Brazil.

“China’s economy is showing signs of stability, with resilient steel demand as growth drivers shifted from property to infrastructure and manufacturing,” Rio said.

“In response to the weaker property market and slowing export growth, the government has implemented support measures, with mortgage access substantially eased in top-tier cities, down payments lowered across the country and purchase restrictions removed in tier 2 cities.”

Meanwhile, macro factors surround the aluminium, titanium and copper markets remain weak, while increased supply and slowing EV demand growth is cutting into lithium carbonate prices, though Rio says long-term supportive government policies around EVs and supply shortfalls lay out a strong set of fundamentals for the battery metal.

Rio meanwhile says the US may still fall into recession by the end of 2023.

“The US economy continues to adjust to the effects of tightening monetary policy,” it said.

“The net effect has been a slowing pace of economic activity which may still lead to a recession by year end. A potential government shutdown and the United Auto Workers strike add to the downside risks. Inflation is still set to moderate gradually over the next few years due to weaker housing inflation and a steady moderation in wage growth.”

Expenditure numbers from Rio have also shown how sharply the pace of work has ramped up to evaluate the Simandou iron ore mine in Guinea, lifting from US$87m in the first nine months of 2022 to US$574m in the first nine months of 2023 on a 100% basis.