MonTREAL — Rio Tinto is on track to expand its iron ore output over the next couple of years, putting additional pressure on small producers which have faced prices falling to five-year lows.
The worlds second-largest iron ore miner after Brazils Vale said production with Australian partners will increase 18 per cent in 2015 to 330 million tonnes, rising to about 360 million tonnes by 2017.
Rio said annual iron ore production, despite a slippage in Canada, grew 11 per cent to 295.4 million tonnes in 2014, capped by a strong fourth quarter. Sales surged to a record 302.6 million tonnes.
Its share of production rose 12 per cent to 233.6 million tonnes, driven by early completion of an Australian expansion project that added 30 million tonnes.
The Iron Ore Co. of Canada, which is majority owned by Rio Tinto, saw overall production fall four per cent in 2014 to 14.8 million tonnes as lower concentrate from cold weather last winter and quality issues late in the year more than offset higher pellet output.
Rio said it realized US$84.3 per tonne from sales in 2014, down one third from US$126 per tonne in 2013.
The spot price of the key ingredient in steelmaking has plummeted and hovered around US$68 on Tuesday.
Rio and other large producers, including BHP Billiton, have increased their output, causing prices to fall which squeeze smaller producers.
Cliffs Natural Resources closed its Bloom Lake mine in Quebec and several exploration companies have slowed their development plans. ArcelorMittal, which invested $1.6 billion to increase its annual concentrate production capacity in the Quebecs Labrador Trough region to 24 million tonnes, said lower prices is forcing a structural change for the iron ore industry to lower costs to offset the possibility of further drops.
Analyst Jackie Przybylowski of Desjardins Capital Markets said she expects IOC will have a better year in 2015, with production increasing slightly to 15.2 million tonnes.
Meanwhile, Rio Tinto said its share of aluminum production decreased one per cent to 3.36 million tonnes as production from its new AP60 plant in Quebec and small increases across its network offset the closure of the Shawinigan smelter in November 2013 and the impact of a partial shutdown at Kitimat, B.C. The updated smelter is expected to be commission in the first half of 2015.
The company said it realized US$2,395 per tonne in aluminum prices last year, up 6.5 per cent from US$2,249 per tonne in 2013.
Diamond production at Diavik slipped to 7.23 million carats (Rios share was 4.34 million carats) on a 25 per cent decrease in carats recovered in the fourth quarter.
