Rio Tinto's Second Quarter Sales Hit a Four-Year High
Jul 19, 2024
Mysteel Network News: Rio Tinto, an Australian iron ore producer, released its production and sales report for the second quarter on July 16, 2024. According to the report, the total iron ore sales volume of Rio Tinto's Australian and Canadian mining areas in the second quarter reached a high for the same period since 2021. However, the overall production in the second quarter showed a trend of year-on-year decline and slight quarter-on-quarter increase. This article will analyze the reasons for the divergence of Rio Tinto's production and sales in the second quarter and predict the marginal increase in the second half of the year from Rio Tinto's new round of iron ore production capacity growth cycle.
As the main production area of Rio Tinto's iron ore, the Pilbara region in Australia achieved a production volume of 79.481 million tons in the second quarter, a year-on-year decrease of 2.18%, and a quarter-on-quarter increase of 1.98% (Figure 1). The increase in production quarter-on-quarter was expected as the traditional rainy season in the first quarter has ended. However, the production showed a significant decline compared to the same period in 2023, mainly due to the following two factors: First, after midnight on May 13th local time, a railway accident occurred about 80 kilometers away from Karratha, where an autonomous train loaded with iron ore collided with a group of stationary freight cars. Although the accident did not cause any casualties, it resulted in 22 freight cars and 3 locomotives being hit, and the railway transportation was suspended for about 6 days, causing the mine yard to be overly saturated, which in turn affected mine production. Second, despite the Gudai-Darri iron ore replacement project in the Pilbara region of Rio Tinto reaching an annual production capacity of 43 million tons in the second quarter of 2023, and then on October 18, 2023, it was announced that an investment of $70 million would be made to increase the mine's annual production capacity to 50 million tons, the accelerated decline in the quality of the ore from the older production capacities of the Channar and Eastern Range mines has limited the overall increase in production to some extent.
The dispatch volume of Pilbara in the second quarter reached 80.309 million tons, a year-on-year increase of 1.51%, and a quarter-on-quarter growth of 2.92% (Figure 2). This significant increase is mainly due to the fact that some ships originally planned to be dispatched at the end of the first quarter were postponed to the beginning of the second quarter due to weather reasons, effectively supplementing the overall dispatch volume. At the same time, about 80% of Rio Tinto's iron ore products in the Pilbara region are directed to the Chinese market. With the improvement of demand in the traditional peak season in China in the second quarter, the enthusiasm of steel mills for production has significantly increased, which has also promoted the growth of Rio Tinto's sales in the region. In addition, Rio Tinto continued to expand its mixed ore business in China in the second quarter, and the sales volume of iron ore at the port also showed a significant increase. The total port sales volume in the second quarter was 7.5 million tons (5.7 million tons in the same period of 2023), a year-on-year increase of 31.57%, and a quarter-on-quarter increase of 15.38% (Figure 3).
As the main production area for Rio Tinto's concentrate and pellet, the Canadian region achieved a production volume of 3.721 million tons in the second quarter, a year-on-year increase of 5.86%, but a quarter-on-quarter decrease of 16.38% (Figure 4). The year-on-year increase was mainly due to the exclusion of the impact of the fire the previous year, but the large quarter-on-quarter reduction was mainly due to the annual maintenance of the mine in June, which led to the suspension of the mining area. The sharp decline in production also led to a year-on-year decrease of 6.75% in sales and a quarter-on-quarter decrease of 8.69% (Figure 5).
Through the analysis of Rio Tinto's capital expenditure (Figure 6), it can be seen that from 2015 to 2023, its capital expenditure has been at a relatively low level, and the expenditure projects have also been mainly concentrated on capacity replacement (such as Gudai-Darri) and the improvement of production efficiency. Although the latest quarterly report shows that the investment for the railway and port infrastructure of the Simandou iron ore project has been raised, and all preparatory work will be completed in the week of July 15, the first production of the project is expected to be realized at the end of 2025. It is worth noting that there are no other large-scale project production plans in the Pilbara region in 2024 (Table 2), which means that the new iron ore production in the second half of the year will be very limited.
According to Rio Tinto's quarterly report, the shipping target for 2024 is still set between 323 million and 338 million tons. Calculated by the median of 330 million tons, the current shipping target completion has reached 48%, which is at a mid-high level in the past four years. This performance shows that Rio Tinto is steadily advancing the expansion of the territory while maintaining good market competitiveness. It is expected that in 2024, Rio Tinto's production will remain relatively stable compared to 2023, laying a solid foundation for the company's subsequent medium and long-term development.
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