* Rio iron ore chief says cyclones, Japan disaster hitting
* Says too early to determine full impact of Japanese crisis
* Eyes early start to massive Guinea iron ore mine
(Adds details, quotes)
By James Regan and Rebekah Kebede
PERTH, March 22 Iron ore supplies remain
scarce as markets begin to realise the huge scale of
reconstruction required in quake-hit Japan, but prices are
dropping as demand shrinks on tightening moves by top consumer
China, global miner Rio Tinto said.
The damage from the massive earthquake and tsunami in Japan
held wide implications for the mining sector, Sam Walsh, Rio
Tinto's iron ore division chief, told an industry conference.
"The impact of the Japanese earthquake and tsunami have been
many and diverse and they affect us," Walsh said on Tuesday.
"Some steel mills have suspended operations and suppliers of
heavy equipment, such as Hitachi, have been impacted."
He said that large plants, including ones operated by
General Motors were running out Japanese component parts.
"There is a large reconstruction ahead, the magnitude of
which is only just being realised," Walsh said.
Demand for iron ore and steel is expected to rebound when
Japan starts rebuilding everything from homes to power plants
and analysts say Japan's steel capacity, at more than 130
million tonnes, can support the reconstruction.
Japan disaster in figures: link.reuters.com/ser58
Japan steel exports, markets:link.reuters.com/bes58r
Iron ore prices: link.reuters.com/vum68r
Spot iron ore prices .IO62-CNI=SI have lost 15 percent
since hitting record highs in mid-February as slow steel demand
in China, the biggest producer and consumer, curbed buying.
Worries that disruptions in steel production in Japan would
cut demand from the world's second-biggest buyer of the raw
material in the near term pushed prices even lower.
Walsh said Rio Tinto's first-quarter iron ore production
would be hit by a string of cyclones that lashed its mining
operations in Australia last month.
"We have only just regained momentum and our quarterly
production report will highlight the impact," he said.
Rio Tinto mines 225 million tonnes of iron ore annually,
mostly in the Pilbara region of Australia, making it the world's
no. 2 producer behind Brazil's Vale .
Australia's other big iron ore miners are BHP Billiton
, and Fortescue Metals Group .
Those companies are also expected to show production was
curtailed by the storms, which flooded rail lines and forced
ports to suspend operations.
The majority of the iron ore mined in the Pilbara is shipped
to China, followed by Japan and South Korea.
Walsh later told reporters Japan's disaster could set back
some of Rio Tinto's expansion plans if access to mining
equipment, such as heavy machinery and truck tyres, became
Fortescue, for its part, said its expansion plans were on
track as it buys very little mining equipment from Japan.
Until recently, Japan was the largest buyer of Australian
ore, but has been supplanted by China.
Walsh painted a bright future for iron ore producers, saying
the outlook warranted spending billions of dollars to expand
mines in Australia and build new ones in Africa and India.
The company's Simandou iron ore mine project in Guinea --
touted by Rio Tinto as the single largest iron ore mine -- would
be developed ahead of the current end-2015 target date if
infrastructure restraints such as rail line construction could
be overcome, according to Walsh.
The mine will have capacity to yield about 95 million tonnes
of iron ore a year, he said.
Countering Walsh's positive outlook, Citibank analyst Daniel
Hynes forecast the global iron ore market was headed for
oversupply over the next few years and would see a 100-million
tonne surplus by 2015.
The surplus would result from large production increases by
Rio Tinto and other miners, he said.
(Additional reporting by Manolo Serapio Jr. in Singapore)