Rio Tinto Refuses to Halt Iron Ore Expansion Plans

Reuters reported that the world’s second largest iron ore producer Rio Tinto (ASX:RIO,NYSE:RIO,LSE:RIO) will go ahead with its plan to expand and up production despite oversupply in the market that has rival companies taking a step back.

As quoted in the market news:

While rivals BHP Billiton (ASX:BHP,NYSE:BHP,LSE:BLT) and Brazil’s Vale (NYSE:VALE) have applied the brakes to their medium term output plans, Rio said on Thursday it would focus on cutting costs so it remains the world’s most profitable producer, keeping its forecast that China’s steel demand will grow towards 1 billion tonnes a year.

“With iron ore now trading around $60 a tonne delivered into China, we have more to do to ensure that we maintain the margin between ourselves and other producers,” Chief Executive Sam Walsh said at the global miner’s Australian annual meeting.

Rio Tinto, the world’s second biggest iron ore producer, and rivals Vale and BHP ramped up output just as demand growth slowed in major customer China, leading to a 55 percent fall in prices since the start of last year that has threatened the survival of smaller producers.

Rio can continue to produce profitably with iron ore prices around $30 per tonne, but a growing number of rivals are suffering. Minnows like Atlas Iron and BCI Iron are most at risk if iron ore prices remain close to current levels for long.

Other large producers such as Anglo American’s Kumba and Minas Rio and Rio Tinto’s own Iron Ore of Canada are also vulnerable, currently trading near breakeven, according to analysts.

Rio expects to ship 350 million tonnes of the steel-making ingredient this year, up from 300 in 2014, including material from stockpiles.

Click here to read the full Reuters report.