Rio Tinto Sees China Steel Demand Dependent on China Covid Controls — Commodity Comment

Rio Tinto PLC on Tuesday reported higher fourth-quarter production of most of its commodities, including iron ore and aluminum. Mined copper output was slightly lower year-on-year, it said. Here are some remarks from the fourth-quarter operations report of the world’s No. 2 miner by market value.

On Australian iron-ore operations:

“Pilbara operations produced 324.1 million [metric tons] (100% basis) in 2022, 1% higher than 2021. Shipments were 321.6 million tons (100% basis), in line with 2021. Performance improvements continued across the system and we achieved record second-half performance across the mine and rail system. We expect Gudai-Darri to reach its nameplate capacity on a sustained basis during 2023.”

On iron-ore markets:

“Iron ore Platts CFR prices rebounded 22% in the quarter, although the average price of $99/ton in the fourth quarter was 4% lower than the third quarter. Market sentiment strengthened after Beijing released three stimulus packages in November to stabilize the real estate market by lifting all previously applied financing constraints on property developers. Prices trended above $110 at year-end as China began dismantling its zero-Covid policy and gradually reopening the economy, while mills also started to replenish in-plant inventories ahead of the Lunar New Year holidays. Steel demand recovery hinges on the country’s ability to control the Covid outbreak.”

On copper production:

“Mined copper production of 521,000 tons was 6% higher than 2021 due to higher grades at Kennecott and Escondida, partly offset by lower grades and recoveries at Oyu Tolgoi as a result of planned mine sequencing. Unplanned maintenance was required at Kennecott in the fourth quarter of 2022 in our anode furnaces leading to extended downtime and continued poor anode production, likely to result in weak cathode production in the first quarter of 2023. Refined copper production at Kennecott will continue to be challenged due to the smelter and refinery performance, until we undertake the largest rebuild in nine years which is planned for the second quarter of 2023 and is expected to take approximately three months.”

On copper markets:

“The copper LME price rose 10% in the fourth quarter to $3.80 [a pound], as market sentiment turned more positive on a series of supply disruptions and low and declining visible stocks, which remain at historically low levels. Price support came in the form of Chinese government policy changes such as in the property market and easing Covid-19 restrictions, together with demand growth in renewables and EVs, plus the return of the investor net long position in copper.”

On aluminum output:

“Aluminum production of 3.0 million tons was 4% lower than 2021 due to reduced output at our Kitimat smelter in British Columbia, Canada and Boyne smelter in Queensland, Australia. The rate of pot restarts at Kitimat picked up in the fourth quarter and Boyne smelter cell recovery efforts continued. Recovery at both smelters is progressing with full ramp-up expected to be completed during the course of 2023. All of our other aluminum smelters continued to demonstrate stable performance.”

On aluminum markets:

“The LME cash aluminum price increased 8% in the quarter, although the average price of $2,324 in the fourth quarter was 1% lower than the third quarter. The market was supported by low reported levels of inventories, and expectations of improving Chinese demand. In North America, shipments of extrusions and rolled products softened over the quarter, mainly on weaker extrusion shipments into the building and construction sector. Aluminum demand growth from renewables and electric vehicles (EVs) remains firm. LME stocks are now at their lowest level in 22 years, and Chinese warehouse stocks are at a six-year low.”

On titanium dioxide operations:

“Titanium dioxide slag production of [1.2 million tons] was 18% higher than 2021, due to community disruptions at Richards Bay Minerals (RBM) in South Africa in 2021, and continued improved performance of operations at Rio Tinto Fer et Titane (RTFT), Canada. Production constraints related to nationwide electrical power load-shedding at RBM were experienced in the fourth quarter.”

On Canadian iron-ore operations:

“Iron Ore Company of Canada (IOC) production of pellets and concentrate was 6% higher than 2021. Successful deployment of the Rio Tinto Safe Production System (SPS) at the concentrator was completed in the year, with record performance metrics achieved in the year, including monthly records for concentrate production and total material moved in the second quarter. Planning for SPS deployment at the pellet plant commenced in December.”

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