Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Rio Tinto’s iron ore shipments from Pilbara fell to 76.3mn mt in Q2, down by 2pc from Q1, while down by 12pc from a year ago. Shipments in H1 were 3pc lower than the prior-year period.



Rio Tinto expects iron ore shipments to be at the low end of the guidance range, and output remains subject to COVID-19-driven disruptions, ramp-up of brownfield replacement mines and ongoing cultural management issues. The company has guided full-year shipment of 325-340mn mt from Pilbara. 


The company has made progress in tying in around 90mn mt replacement mine capacity at existing sites in Robe Valley, West Angelas and Western Turner Syncline, Phase 2. These projects are on track for 2021 completion, while the Gudai-Darri project is expected to ramp up in 2022. The company is facing headwinds due to the tight labour market in Western Australia, which has limited the availability of skilled contractors and drivers.


Mined copper and bauxite production is expected to be at the low end of the guidance range at 500,000-550,000mt and 56-59mn mt, respectively.


Rio Tinto expects the global economic recovery to continue and key economic indicators to return to pre-COVID levels amid supportive government policies and successful vaccination drives. While the company remains watchful of risk associated with the following.


* Iron ore price has remained strong on robust demand and weak supply. In China, steel demand is up by 5pc in H1 compared to a year ago, with the strong performance of the construction and auto sectors. 


* Iron ore consumption was also robust globally, with demand up by 15pc in 2021 from 2020. Supplies from major producers continue to lag expectations, but the high cost of supply balances the overall market. 


* Scrap is recovering from its H1 2020 lows. Global scrap consumption in H1 is set to rise 18pc from a year ago on improved crude steel output and scrap availability. 


* Aluminium price supported by tight physical markets and higher LME and premia. Also, strong demand for semis in the global market, which is up 8pc in 2021 from 2020 is supporting prices. 


* Copper prices continue to rally led by multi-year lows in supply growth, which is approximately up by 1pc from a year ago. Strong demand recovery, globally and in China is supporting prices. 


* New variants of the virus, and rising inflation driven by the supply and demand imbalance. 


* China’s GDP growth is slowing on fading stimulus-spiked demand and tightening credit conditions, while consumption and non-real estate demand continue to recover. 


* Consumer confidence in the US is rising on easing COVID-19 restrictions and consumer demand is likely to shift from manufacturing to services amid stronger economic activity. Housing market growth is slowing but is still at historical highs. 


* Europe is showing strong recovery, however, reopenings in some countries are hindered by a surge of the virus variants. 



In Q2, iron ore production from Pilbara fell to 75.9mn, down by 9pc from Q2 2020 because of heavy rains in the West Pilbara region, shutdowns for replacement mines tie-in, processing plant unavailability, and cultural heritage management issues. Tight labour market and COVID-19 restrictions have delayed the work of replacement of new mines.


Pellets and concentrate production at Iron Ore Company of Canada (IOC) declined by 2pc lower from a year ago amid a short supply of labour and equipment. 


Rio Tinto’s aluminium production rose by 4pc to 0.8mn mt from the prior year with ISAL smelter, Iceland; and the Quebec-based Becancour smelter operating at full capacity. Also, the British Columbia-based Kitimat smelter is nearing completion of its pot relining project. 


Bauxite production fell to 13.7mn mt, down by 6pc from a year ago due to system instability issues caused by severe wet weather conditions in Eastern Australia during Q1. 


Mined copper output fell by 13pc from a year ago to 115,500mt amid lower recoveries at Escondida due to the extended impact of COVID-19, and a scheduled relocation of crusher at Kennecott. Following a slope failure at Bingham Canyon pit, Kennecott mining rates in the area will be slow and hence some high-grade output expected in late 2021 will likely be deferred until 2022.


Rio Tinto Q2 FY2021 production
Commodities (mt)Q2 2021Q2 2020Change YoYChange QoQH1 2021H1 2020Change YoY
Copper – mined1,15,5101,32,776-13%-4%2,36,0602,65,749-11%
Copper – refined52,26526,88694%-12%1,11,42874,13150%
Iron Ore66.241mn71.689mn-8%1%131.922mn138.477mn-5%

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