In Commodity News 09/03/2016
Mining major Rio Tinto expected some 75-million tonnes of new iron-ore supply to come into the market during 2016, forcing further high-cost suppliers to exit the market.
The company’s Pilbara Mines MD, Michael Gollschewski, told delegates at the Global Iron Ore & Steel Forecast conference, in Perth, that in 2015, about 110-million tonnes of new low-cost seaborne supply entered the market, with some 130-milllion tonnes exiting the contestable market, of which 35-million tonnes came from China.
“Rio Tinto is the lowest cost producer on the curve and the demand for our high-quality product continues to be robust and attracts a premium,” Gollschewski said.
“We are continuing to focus on taking the necessary strategic and tactical actions to maintain our position. Complacency is not an option,” he added.
Gollschewski noted that in 2015, Rio worked to increase productivity, reduce operating costs and working capital, and to deliver incremental volume expansions from its projects, in an effort to generate free cash flows.
In the year, working capital was reduced by some 83% year-on-year, with the miner also delivering a 20% productivity improvement, with the iron-ore division delivering over $428-million in savings over 2015, and $1.1-billion since 2012.
“We are not stopping there. Our pre-emptive actions have held us in good stead to date and we will continue to take decisive action. We have announced further cost management measures and significantly reduced our capital expenditure,” Gollschewski said.
He added that Rio’s focus was also on deriving full value from its investment in assets and infrastructure.
“We adhere to a disciplined capital allocation framework and continually evaluate our portfolio and potential growth options so that we can full utilise our infrastructure when the time is right to invest.”
