Mining giant Rio Tinto has lowered its iron ore shipment guidance for 2019 by 4%, or 13 million mt, because of mining issues, the company said in a note to the Australian Securities Exchange Thursday.
A review of mine plans has led the company to cut its Western Australian Pilbara shipments guidance on a 100% basis for 2019 to between 320 million mt and 330 million mt, down from 333 million mt to 343 million mt, the miner said.
"Rio Tinto Iron Ore is currently experiencing mine operational challenges, particularly in the Greater Brockman hub in the Pilbara. This is resulting in a higher proportion of certain lower-grade products, partly to protect the quality of our flagship Pilbara Blend," the world's second largest iron ore producer said.
RBC Capital Markets analyst Paul Hissey said: "From an operational perspective, this downgrade could undermine confidence in Rio's reputation, coming on the back of an earlier downgrade in April 2019. Although perversely reduced volumes tend to have a positive impact on price and so in some respects, this news honors the company's 'value over volume' mantra."
"In isolation, Rio's further reduction in volumes may have provided an additional driver for prices to move higher, although the news around a potential restart at [Vale's Brazilian] Brucutu may offset this," he said.
Rio earlier in the year lowered its guidance from 338 million mt-350 million mt following issues caused by tropical cyclone Veronica in Western Australia. The new shipment guidance is 18 million mt-20 million mt lower than what was expected prior to the cyclone in March.
In the January-March quarter, total shipments from Rio's Western Australian iron ore assets were at 69.1 million mt, which was down 14% year on year and down 21% from the October-December quarter.
Rio said that given the most recent volume guidance change, it will update its unit costs in its quarterly review due July 16.
