Ore miner Rio Tinto to slash output by a third

10 Nov 2008

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With steel producers announcing cuts because of a global slowdown, miners of iron ore, the main input for steel production, cannot remain far behind. Rio Tinto Ltd/Plc the world's No. 2 iron ore miner, will slash output by as much as a third for the rest of this year, joining its Brazilian rival Vale in trying to stem a fall in prices as global steel demand slumps. (See: Steel companies cut back production as demand slackens / Steel slowdown: Chronology of production cuts)

With the onset of a likely global recession cutting deep into steel use around the world, miners including Rio and Brazil's Vale have committed to cutting output by as much as 52 million tonnes, or about 6 per cent of globally traded supply.

Rio said it was revising estimates of iron ore shipments from the Pilbara region to between 170 million tons and 175 million tons in 2008, representing a 10 per cent reduction in the annualized run rate of production from the mines.

A spokesman for BHP Billiton, Rio's main rival in Australia's Pilbara iron ore belt, had no immediate comment on BHP's operations. With the Rio cuts, BHP remains the only large iron ore miner not to initiate production cuts this year in the face of sagging demand for ore from steelmakers. Brazil's Vale, the world's largest iron ore miner, announced on 31 October that it would cut its iron ore output by 30 million tonnes a year from November.

"Operations continue to perform well, but demand has continued to decelerate. This reduction is a prudent move to align production with revised customer delivery requirements in the light of the fourth quarter drop in Chinese demand," said Rio Tinto CEO Tom Albanese, according to a company statement.

"We believe this will be a short, sharp slowdown in China, with demand rebounding over the course of 2009, as the fundamentals of Chinese economic growth remain sound," he added.

This production cut comes amid an economic slowdown in China, one of the world's largest consumers of commodities such as iron ore. It follows a day after mainland China announced a four trillion yuan ($586 billion) economic stimulus package, to be spent over the next two years, in an effort to reverse slowing economic growth in the country. (See: China pumps $586 billion to bolster economy)

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