Rio reviewing iron ore strategy

While Rio Tinto delivered a one per cent uplift in quarterly iron ore production, the company’s production of lower-grade ore continues to rise.

Comparing the nine months to September’s end with the same period last year, Rio’s production of SP10 lump has increased 103 per cent while the production of SP10 fines has increased 20 per cent.

At the same time, Rio’s output of the higher-grade Pilbara Blend – the global iron ore sector’s most recognisable product – is retreating, with a 12 per cent decline in Pilbara Blend lump production and an 8 per cent drop in Pilbara Blend fines production.

Pilbara Blend is the preferred iron ore product in China, with its higher-grade makeup contributing to lower greenhouse gas emissions in the steelmaking process. While SP10 comes from the same orebodies as the Pilbara Blend, it is a lower-grade product.

Rio said SP10 production levels are expected to remain elevated as “replacement projects are delivered”.

This is prompting the major to review its iron ore business.

“We are reviewing our future product strategy, having regard to customer requirements and available ore grades,” Rio said in its quarterly production report.

As for the iron ore market, Rio observed production from higher-cost suppliers decline in the September quarter amid lower prices.

The company said that while China’s economy recovery “has been uneven”, there are signs of some ascendancy.

“There were headwinds to iron ore demand in the major steel-producing regions at the start of the quarter; however, Chinese demand improved in September following completion of maintenance at steel mills,” Rio said.

“Iron ore inventories at Chinese ports were flat, while China’s steel exports fell slightly during the quarter, but remained higher than a year ago.”

Rio recently made a splash in the lithium market, acquiring Arcadium Lithium for $10 billion.

This has supercharged the major’s lithium plans, with possession of numerous upstream and downstream assets across the world.