Rio Tinto CEO Defends Higher Iron Ore Output

Bloomberg reported that Rio Tinto plc (NYSE:RIO,ASX:RIO,LSE:RIO) has defended its higher iron ore output with the reasoning that forfeited supply would be made up by rivals with higher costs, which wouldn’t be in the interest of its shareholders.

As quoted in the market news:

The raw material fell 47 percent in 2014 and extended losses this year as the lowest-cost producers including Rio boosted output and spurred a glut, wagering that less efficient miners will curb supply or shutter mines. The surplus will more than double to a record this year as low-cost suppliers keep expanding, Australia & New Zealand Banking Group Ltd. said in a report on Wednesday, cutting price forecasts through 2018.

Rio Tinto CEO Sam Walsh stated:

Guess what happens when you take 100 million tons off? The price goes up, and all those people that went out of the market come back into the market. And guess what? The price gets back to where it was and, whacko, we would be down 100 million tons.

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