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Rio Tinto shares up, Q2 iron ore shipments come in below expectations

We examine the highlights of Rio Tinto's second quarter production results.

The Rio Tinto (RIO) share price rose after the large-cap miner revealed a strong set of second quarter results to the market on Friday, 17 July. Rio Tinto's Chief Executive Officer, J-S Jacques described these results as demonstrating the resilience and adaptability of the mining giant’s underlying business; while going on to note that:

'We are executing our value over volume strategy to drive performance, productivity, and free cash flow per share. We will remain agile and ready to adapt to the changing operating and macro environment.'

At the time of writing, the Rio Tinto share price was up 0.36%, to $103.88 per share.

Q2 results at a glance

Overall, and looking at Rio Tinto’s just-released production results, on a year-over-year basis, the miner today reported:

  • Iron ore shipments of 86.7 million tonnes, up 1%
  • Bauxite production of 14.6 million tonnes, up 9%
  • Aluminium production of 785 kilotonnes, down 2%
  • Titanium dioxide slag production of 262 kilotonnes, down 13%

Maybe most importantly however, Rio Tinto said that it was on track to hit its full-year 2020 iron ore guidance. Even so, it should be noted that today’s quarterly Q2 shipment results came in somewhat below what analysts were expecting.

As noted above, Rio Tinto reported Pilbara iron ore shipments (100% basis) of 86.7 million tonnes, representing a year-over-year increase of just 1%, but a quarter-over-quarter increase of 19%. For reference, analyst estimates heading into the Q2 stood at 87.3 million tonnes, according to Bloomberg.

Quarterly iron ore production (100% basis) reached 83.2 million tonnes.

This comes as demand for iron ore continues to recover in China – arguably the miner’s most important market. Speaking of the conditions within the Chinese market, it was noted that, 'While employment and trade uncertainties remain, the construction and infrastructure sectors are performing well; house prices and stock markets are also recovering, lending support to consumer confidence.'

Demand in Japan and Europe however, has yet to meaningfully recover.

Elsewhere, management said that during the quarter 1.7 million tonnes of iron ore were sold through port sales. This move, said the company, is part of a push 'to better serve our existing customers and open opportunities to sell to new customers who do not participate in the seaborne market.’

Other bits and pieces

Looking forward, the company noted that total 2020 capital expenditure (CAPEX) is expected to come in at around $6 billion (previously guided at between $5 to $6 billion). 2021 and 2022 CAPEX is expected to come in at around $7 billion per share.

Previously stated full-year production guidance across Rio’s main commodities were reiterated as part of today’s Q2 update.

How to trade Rio Tinto

What do you think: are you bullish or bearish on Rio Tinto’s prospects in the wake of today’s Q2? Trade accordingly. For example, you can trade Rio Tinto shares and other large-cap mining stocks – both LONG and SHORT – through IG’s world-class trading platform now.

To buy (long) or sell (short) Rio Tinto with CFDs, follow these simple steps:

  1. Create an IG Trading Account or log in to your existing account
  2. Enter ‘RIO’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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