Rio Tinto recently released its Q1 production results, a quarter in which the coronavirus outbreak overwhelmed health systems, disrupted supply chains and led to downward revisions of economic growth forecasts.
Even so, Rio Tinto’s production levels, while down compared with Q4 2019, were up on a year-over-year basis (i.e., compared with Q1 2019).
Iron ore production up 5% year over year, down 16% from Q4 2019
“In these uncertain and unprecedented times we continue to deliver products to our customers with our first priority to protect the health and safety of all our employees and communities,” CEO J-S Jacques said in a release. “We are focused on maintaining a business as usual approach and have taken extensive measures to ensure we can do so safely.
“All of our assets continue to operate and we achieved a very robust production performance in the first quarter. Our world-class portfolio and strong balance sheet serve us well in all market conditions and are particularly valuable in the current volatile environment. Our resilience and value over volume strategy mean we can continue to invest in our business, and support our communities and host governments.”
In Q1, Rio produced 72.9 million tons of iron ore, up 5% year over year but down 16% from the previous quarter.
Bauxite production jumped 8% year over year to 13.8 million tons, but dropped 9% from the previous quarter.
Iron ore pellet and concentrate production reached 2.6 million tons, up 3% year over year and flat compared with the previous quarter.
As for the COVID-19 crisis, the firm said some projects started to feel the impact in Q1.
“All major projects progressed well in the first quarter, but are now being affected by Covid-19 including government imposed restrictions on the movement of goods and people,” the firm said. “Recovery rates may differ across regions – we will update the market once the situation stabilises.”
In response to the COVID-19 crisis and the South African government-imposed lockdown, Rio reduced its operations at Richards Bay Minerals in the country. Meanwhile, Rio is also working with the government of Quebec “to comply with the directive to slow down non-critical projects and activities for our Quebec operations.”
In New Zealand, Rio closed the fourth pot-line at its Tiwai Point aluminum smelter.
Demand recovery in China
As China has started to reopen, demand from the country has begun to pick up, Rio Tinto said.
“Demand in China continues to recover,” the company noted in its production report. “In the rest of the world, the outlook is more uncertain. Commodity supply is being disrupted as Covid-19 restrictions impact supply chains and people movement globally.”
China’s demand for both iron ore and bauxite grew in the first quarter, according to the company.
Demand, however, is not the only factor contributing to lower commodity prices.
“To some extent, weaker commodity prices also reflect decreasing industry supply costs, which are falling due to a strong US dollar and tailwinds from lower energy and freight costs, partly offset by Covid-19 related expenditure,” Rio Tinto said.