Rio Tinto lowers 2017 iron ore guidance due to delay of its driverless train system AutoHaul

James Nickerson
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Rio Tinto expects to continue to experience volatility in commodity prices across all markets (Source: Getty)

Rio Tinto has cut its 2017 production guidance but posted year-on-year gains.

The figures

Global iron ore production for the first quarter of the year were reported at 84m tonnes, up 13 per cent from last year.

However, the figure for first quarter iron ore production represents a four per cent fall compared to the last quarter of 2015.

Analysts surveyed by Bloomberg on average expected production of 83.9m tonnes.

The miner said that 79.9m tonnes of iron ore was produced in its Pilbara operations, a 12 per cent juump on the same quarter of 2015.

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Why it's interesting

Rio Tinto expects to produce 350m tonnes of iron ore globally this year, up from 328m tonnes in 2015.

But it's also cut its target for production in 2017 to between 330m tonnes and 340m tonnes, down from 350m tonnes, "subject to final productivity and capital expenditure plans".

That's because of delays to AutoHaul, its driverless train system.

Read more: Iron ore makes massive 19 per cent price jump

And sales were 3m tonnes below production in the first quarter of 2016 due to "seasonal re-stocking and weather disruptions from Tropical Cyclone Stan", which hit Australia in January.

But disruptions to iron ore supplies are thought to have helped bolster the commodity's price.

Seasonally, iron ore, the main steelmaking ingredient, has risen to near $60 a tonne after Chinese steel prices have rallied moving into the country's construction season.

Read more: Economic data and miners set to drive FTSE

Meanwhile, Rio Tinto kept its output guidance for most of its other commodities unchanged.

The miner said its 2016 expected share of production of "bauxite, alumina and aluminimum remains unchanged at 4.5m tonnes, 7.8m tonnes and 3.6m tonnes, respectively".

Tomorrow brings BHP Billiton’s operational review for the nine months ended 31 March 2016, while on Thursday Anglo American will deliver its production report for the first three months of the year.

What Rio Tinto said

Rio Tinto chief executive Sam Walsh said:

These results demonstrate our commitment to operational excellence in 2016, with notable improvements in several important areas, including a strong performance in Aluminium. However, we continue to experience volatility in commodity prices across all markets.

In the face of a testing external environment, our focus remains on delivering further cost and productivity improvements, disciplined capital management and maximising free cash flow, to ensure that Rio Tinto remains strong.