SYDNEY, Jan 15 (Reuters) – Australian miners shoveled record tonnages of iron ore in the December quarter, supported by billions of dollars worth of expansion plans coming on stream and despite signs of weakening demand from top consumer China.
Iron ore continues to generate big returns even as prices fall, and miners in Australia – the world’s biggest supplier – are counting on economies of scale to maintain profits for the steel making material.
Production data from Rio Tinto, BHP Billiton and Fortescue Metals Group will be released over the next two weeks, but port data already shows record tonnages were shipped in the last quarter even as Chinese demand lost steam.
Chinese iron ore purchases fell 5.6 percent to 73.4 million tonnes in December, down from a record 77.8 million in November and ore prices have dipped to a six-month low.
And weaker steel prices have prompted some mills to reduce production, putting China’s average daily crude steel output at 1.961 million tonnes in late December, the first time the pace fell below 2 million tonnes since last February.
But Australian iron ore mining seems immune from the spending crunch afflicting other commodities as a slowdown in Chinese growth cools a decade-long mining boom.
Rio Tinto kicks off the quarterly production reporting season on Thursday with output likely to hit nearly 70 million tonnes, keeping its full-year target of 265 million tonnes in sight.
That would secure Rio Tinto’s ranking in global production behind leader Vale of Brazil, which is forecasting 2013 ore production of 306 million tonnes.
By the second quarter of 2014, Rio Tinto is scheduled to be operating at a yearly run rate of 290 million tonnes before progressively rising to 360 million in 2017.
“So much of the revenue generated by the big mining companies comes from iron ore, it makes sense to build on economies of scale,” said Keith Goode, an analyst at Eagle Mining Research.
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