* Rio Tinto boosts Q2 iron ore output, shipments
* Sees total 2014 iron ore shipments around 300 mln/t
* Global miners count on Chinese mines closing to boost
By James Regan
SYDNEY, July 16 Rio Tinto reported on
Wednesday a sharp rise in iron ore output in Australia, as the
global miner agressively expanded shipments to China, banking on
its low costs to displace local Chinese producers.
Mega miners such as Rio, Brazil's Vale and BHP
Billiton have been ramping up output, reducing their
costs even further despite concerns of an oversupply as China's
steel output growth moderates.
China's domestic industry is fragmented, with miners in
coastal areas suffering under some of the highest production
costs in the country - well above the price of imported ore from
Australia and Brazil.
Ore from China's estimated 6,000 mines on average contains
less than 30 percent iron, compared with Australian and
Brazilian ores that typically have close to double that amount.
Rio Tinto, which competes with Vale, BHP and Fortescue
Metals Group in the seaborne iron ore market, said it was on
track to produce 295 million tonnes of the steel-making material
in 2014, up from 266 million last year.
"Our iron ore expansion continues to deliver high-margin
growth reinforcing our position as a low-cost producer," Rio
Tinto said in its second-quarter production report on Wednesday.
Second-quarter iron ore shipments climbed 23 percent on the
same period a year ago to 75.7 million tonnes, while production
of the steel-making ingredient rose 11 percent to 73.1 million,
the company said.
China has the world's biggest steel industry, requiring
about 1 billion tonnes of iron ore annually.
Analysts have questioned the expansion plans of big iron ore
miners in the absence of hard evidence Chinese mines were
closing and volatility in iron ore spot pricing markets.
Iron ore for immediate delivery to China .IO62-CNI=SI
stood at $98 a tonne on Wednesday, but fell as low as $89 in
mid-June, it weakest price in 21 months.
However, consultancy Wood Mackenzie forecasts that China
will this year close up to 80 million tonnes of domestic mine
production - more than a quarter of its total annual
"All our customers are interested in is how much it will
cost to make a tonne of steel and how much they are paying for
iron molecules in the ore," said Nev Power, chief executive of
Fortescue metals Group Ltd, which has spent more than
$10 billion establishing a 155-tonnes-per-year mining business
Fortescue delivers its ore for around $52 a tonne.
Rio Tinto breaks even when iron ore sells for around $43 a
tonne, while BHP needs $45 a tonne to stay in the black.
BHP is lifting output to between 260 million and 270 million
tonnes from a 217 million tonne target in 2014 and is likely to
show a sharp rise in June quarter output when it releases
production data on July 23.
(Editing by Richard Pullin)