Rio raises its iron forecast despite slump

MINING giant Rio Tinto put up its production outlook for iron ore yesterday, and upped its full year guidance on the commodity thanks to strong demand from steelmakers.<br /><br />Rio, the second-largest miner of the ore &ndash; which is used to make steel &ndash; said it had seen early signs of recovery in key markets, with a high level of shipments to China.<br /><br />The group extracted a record 47.5m tonnes of the metal in the previous quarter, up 12 per cent from 42.4m a year ago. <br /><br />Metals markets are expected to continue to rebound from the weak demand levels that plagued the sector last year when the global financial crisis decimated industrial activity worldwide, prompting producers to step up output.<br /><br />Iron ore accounted for 76 per cent of Rio&rsquo;s underlying earnings in the first half, so the increase in demand is good news for the company, especially as sagging commodity prices have hit its aluminium division.<br /><br />The group has cut back on its production of aluminium, and said yesterday 42 per cent of its smelting capacity assets had been sold or shut down.<br /><br />Tom Albanese, the company&rsquo;s chief executive, said Rio was still focusing on cost reductions, despite key indications of improvement. <br /><br />&ldquo;We are seeing early signs of a recovery in some of our key markets, although we remain cautious about the near term outlook,&rdquo; he said.<br /><br />Rio added it had sold $4.1bn (&pound;2bn) of assets and used $14.8bn from a rights issue to pay down its debt.<br />