Rio Tinto on track for iron ore record as China's imports surge

[MELBOURNE] Rio Tinto Group is on track for record annual shipments of iron ore as the world's second-largest exporter's rail capacity increases and imports by China's steel mills keep surging.

The company confirmed shipments from Western Australia will hit about 330 million tonnes in 2017, London-based Rio said on Tuesday in its production report that showed quarterly cargoes continued to gain. The total would top the 327.6 million tonnes exported last year.

Imports by China surged above 100 million tonnes to a record in September, topping a previous high set in 2015, as the world's top steelmaker's drive to boost air quality stokes demand for imported higher-grade and less-polluting raw materials.

"Rio will remain a beneficiary of ongoing reforms in China, which appear to be supporting key commodity prices", including iron ore and aluminium, Melbourne-based RBC Capital Markets analyst Paul Hissey said in a note.

Rio advanced 1.3 per cent to A$71.46, the highest since February 2013, in Sydney trading, extending its advance over the past 12 months to about 41 per cent.

Shipments jumped 6 per cent to 85.8 million tonnes in the three months to Sept 30, in line with the median estimate of 85.3 million tonnes among five analysts surveyed by Bloomberg.

Rio, which officially opened its Silvergrass mine in August, expects further performance improvements with implementation of its autonomous train programme by the end of 2018, according to the statement. The producer had in July narrowed its annual guidance after rail maintenance crimped shipments in the first half.

The company will need iron ore exports to hit a record rate in the final three months to meet the forecast of 330 million tonnes, according to Macquarie Group Ltd estimates.

Benchmark prices, which slumped from mid-August on concern over weaker demand, have advanced since the release of the China customs data last week. Ore with 62 per cent content in Qingdao gained 0.7 per cent to US$62.94 a dry tonne on Monday, according to Metal Bulletin Ltd.

Cuts to steel production in China through winter, amid the efforts to improve air quality, are likely to push prices lower before a rebound in mid-2018, Deutsche Bank AG analysts including Sydney-based Paul Young said in an Oct 5 note.

Rio's full-year copper production is forecast at between 460,000 tonnes and 480,000 tonnes, from earlier guidance of 500,000 tonnes and 550,000 tonnes, according to the statement. That followed a delayed ramp-up of an expansion at Chile's Escondida mine - the world's biggest - and planned adjustments to output in the final three months at the Kennecott mine in Utah.

BLOOMBERG