MELBOURNE (Reuters) - Rio Tinto warned on Friday that a resurgence in coronavirus cases was putting global economic growth at risk, and that steel production outside China has sharply dropped even as stimulus measures prop up demand in the top consumer.
Worldwide trade has been showing signs of recovery as countries emerge from lockdowns, but economists still see challenges with fresh outbreaks adding to the uncertainty about the path of the pandemic and its economic fallout.
“Global economic activity in the third quarter was generally strong, helping to sustain optimism for a widespread recovery in 2021,” Rio said in its quarterly production report.
But data suggests “the rate of recovery in growth is slowing in most economies, with pent-up demand dissipating, and the rise of renewed lockdowns threatening recovery”, it added.
China’s commodity-intensive stimulus measures have supported record demand for iron ore but steel production outside of China remains down significantly year on year, the world’s biggest iron ore mining company said.
Inventories of iron ore, a steelmaking ingredient, are expected to grow modestly amid strong fourth-quarter shipments from major producers and as China’s steel consumption eases from record highs and scrap consumption increases, Rio said.
However, steel production in Japan, South Korea, Taiwan and Europe are showing signs of recovery, it added.
Rio posted a 4.6% drop in third-quarter iron ore shipments to 82.1 million tonnes due to planned maintenance at Australia’s Dampier Port, ahead of a UBS estimate of 81.9 million tonnes.
But it kept its annual shipment forecast of 324 million-334 million tonnes. Iron ore accounts for more than 85% of Rio’s underlying earnings.
Rio shares fell 0.5% to A$95.79 ($67.84) in a flat broader market.
The miner narrowed its estimated development costs for its Mongolian copper project Oyu Tolgoi to $6.6 billion-$7.1 billion, from $6.5 billion-$7.2 billion, adding that first production is trending towards the earlier months of the October 2022 to June 2023 range.
Rio also said the start of production at its Winu copper project in Australia’s Pilbara region could be delayed beyond 2023 because talks with indigenous traditional land owners could take longer than anticipated.
Rio’s CEO and two deputies announced their resignations last month, bowing to a shareholder outcry over the destruction of two significant Aboriginal rockshelters and what was seen as the miner’s inadequate initial response.
Rio said it has changed the name of its Koodaideri iron ore project, which is on track to start production in early 2022, to Gudai-Darri at the request of the Banjima traditional owners.
At Rio’s U.S. Kennecott operations, mined copper production fell 40% on the year due to lower grades while refined copper slumped 74% after a delay to smelter restart.
($1 = 1.4120 Australian dollars)
Reporting by Melanie Burton in Melbourne and Anushka Trivedi and Nikhil Kurian Nainan in Bengaluru; Editing Jane Wardell and Himani Sarkar
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