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Australian mining giants Rio
Tinto and Fortescue Metals Group have joined BHP Group in reporting
record shipments of iron ore, the bulk of it to China, as an
infrastructure and property construction boom in the world's second
largest economy drives a rebound in steel production.
The companies have reported
record earnings on the back of the iron ore shipments, even though
exports of other minerals like aluminium and copper remain in the
doldrums as the coronavirus pandemic saps global demand.
Australia’s record iron ore
exports to China, combined with a surge in shipments of coking and
thermal coal, indicate trade in the key industrial ingredients has
not suffered because of a diplomatic spat between the two countries.
Rio Tinto reported on
Thursday its iron ore shipments to China in the first half of the
year rose 3 per cent compared to the same period a year-earlier.
This pushed earnings up 2
per cent and allowed the Anglo-Australian miner to promise a US$2.5
billion dividend payout for shareholders.
Announcing its fourth
quarter fiscal results, Fortescue projected that iron ore shipments
to China would rise 6 per cent to 178 million tonnes for the full
financial year ended in June, exceeding its target of 177 million
tonnes. Full-year results will be announced in a few weeks.
The miner said exports were
buoyed by strong Chinese steel production of 499 million tonnes in
the first six months of the year, 1.4 per cent higher than the same
period last year.
Rio Tinto chief executive
Jean-Sebastien Jacques said China had effectively absorbed the
additional iron ore diverted from weaker steel markets in Europe and
Asia.
“The main market for our
high-quality iron ore is China, which compared to the broader global
economy has recovered exceedingly well,” Jacques said while
announcing company results on Wednesday.
“China’s steel production
and demand for iron ore in 2019 was strong and this has continued
despite disruptions in the first quarter.
“In 2020, China’s crude
steel production has again exceeded the 1 billion tonne annualised
run rate and June production was a new all-time high record.”
Steel markets in Europe, the
United States, Japan, South Korea and Taiwan were still weak, Rio
Tinto said.
BHP also said last week it
had met production targets for iron ore, thanks to China’s economic
recovery.
“In China, blast furnace
utilisation rates have increased from around 80 per cent earlier in
February 2020 to above 90 per cent in June 2020,” BHP said in its
financial year review.
“We continue to believe that
if China can avoid a second wave of Covid-19, steel and pig iron
production can both rise in the 2020 calendar year versus the prior
year.”
Rio Tinto said Australia’s
contract-based iron ore shipments were strong, despite impacts from
the coronavirus outbreak, allowing it to outperform other major
miners such as Vale in Brazil, which has suffered from production
restrictions and delays.
But Vale, which has recently
suffered setbacks including the Brumadinho dam collapse at its
Córrego do Feijão mine, also saw profit recover in the second
quarter thanks to higher iron ore prices. It said on Wednesday it
would pay dividends that have been suspended since the dam accident
last January.
The continued demand for
iron ore in China means Rio Tinto is committed to developing new
iron ore projects at Simandou blocks 3 and 4 in Guinea, along with
Chinese partner Chinalco Mining and the country’s government.
The diversified miner said
it had drawn up plans to commission China-based design institutes to
update and re-engineer the infrastructure of the project, which was
approved in 2010.
“The Chinese are pretty
active and they want to see a pathway to develop the two blocks,”
Jacques said.
Australian mining giants Rio
Tinto and Fortescue joined BHP in reporting record shipments of iron
ore in the latest period, the bulk of it to China, as that country’s
sharp rebound in steel production to feed its infrastructure and
property construction programmes caused demand to soar.
Source: South China Morning
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