Rio Tinto Pares Output of Less-Sparkling Niche Commodities – by Rhiannon Hoyle (Wall Street Journal – October 16, 2015)

http://www.wsj.com/

Mining giant cuts back production of diamonds and salt amid weakness in commodity markets

SYDNEY— Rio Tinto PLC’s shipments of iron ore have surged, although the mining giant is dialing back production of some niche commodities such as diamonds and salt amid broad-based weakness in commodity markets.

Mining companies around the world have been put on the back foot by slumping prices for natural resources from gemstones to copper and coal thanks to ample global supplies and slowing economic growth. In some sectors, companies have pared output in the hope markets would rebalance, while in others miners have raced to cut costs with the aim of riding out the downturn.

On Friday, Rio Tinto said it has decided “to pause final product processing in the fourth quarter at Argyle in light of current market conditions.”

Rio Tinto’s Argyle operation in the remote East Kimberley region of Western Australia is one of the world’s largest diamond mines and the biggest supply of natural-colored pink and red diamonds.

The miner now expects to produce 18 million carats of diamonds this year, down from a prior estimate of 20 million carats.

It has also pared back the output of salt, a commodity used heavily by the chemical industry and sold to food manufacturers. Rio Tinto is one of the world’s biggest suppliers in that market too. “Salt production in the first nine months of 2015 was lower than the same period of 2014 as a result of weaker demand,” the company said, without elaborating.

In small commodity markets, dominant producers tend to be quicker to adjust output in line with demand. It is the same strategy adopted by companies such as Iluka Resources Ltd., a major producer in the niche mineral sands industry, which in recent years curbed output of those raw materials used in items such as plastics and ceramics as demand tumbled.

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