Rio Tinto has released its Q2 production report. Here is the only part that matters:
- Record first half iron ore shipments, production and rail volumes. Shipments from the Pilbara exceeded production as stocks built ahead of the delivery of the expanded infrastructure were drawn down, while existing mines continue to be expanded to utilise increased rail and port capacity.
- In May, Rio Tinto announced that its Pilbara iron ore system of mines, rail and ports reached a run rate of 290 million tonnes a year (Mt/a), two months ahead of schedule.
- The rail duplication and trackwork required for the 360 Mt/a expansion is now complete. Critical 360 Mt/a port infrastructure remains on track for completion by the end of the first half of 2015.
So, 73.1 million tons of iron ore in the three months through June, up 10% from the previous quarter. 139.5 million metric tons of iron ore shipped in the six months through June, up 10% from a year earlier. Shipped tonnages rose 20% to 142.4 million tons.
This is around consensus and Rio is already operating at above its 290mt annualised nameplate capacity in the quarter. There is more productivity to be squeezed out yet too (perhaps 20mt by year end) before we launch into Pilbara 360 and the second tidal wave of iron ore production next year.
From mid year Rio will likely and be ramping up 90mt of new capacity(it still needs to approve the mines). Roy Hill will add 55 mt a few moths later. Vale will add 90mt a few months after that.
Huge tonnages and greater supplier competition. A recipe for price collapse.
