What’s the outlook as Rio says Chinese demand continues to recover?

We examine Rio Tinto’s latest quarterly production release.

Uncertainty continues to dominate the markets. Size is no antidote, either. Rio Tinto, one of the world's largest iron ore miners shows as much.

Reflecting on RIO's first quarter production results, the miner's Chief Executive Officer, J-S Jacques said:

'In these uncertain and unprecedented times we continue to deliver products to our customers with our first priority to protect the health and safety of all our employees and communities.’

'All of our assets continue to operate and we achieved a very robust production performance in the first quarter,’ Mr Jacques added.

For reference, Merriam-Webster defines robust as ‘having or exhibiting strength or vigorous health.’

Rio Tinto share price: Q1 production results at a glance

Looking at the miner’s Q1 production results, on a quarter over quarter basis, Rio Tinto noted that both its iron ore shipments and iron ore production fell; bauxite production also declined, while titanium dioxide slag production recorded a modest increase during the quarter.

Overall, the miner shipped 72.9 million tonnes of iron ore in the first quarter of 2020 – representing a 5% increase on a year-over-year basis, but a 16% drop-off from Q4 2019. The company pointed out that these Q1 shipment figures were impacted by adverse weather conditions in February.

Even so, Macquarie’s ever-bullish analysts were expecting more ‘robust-ness’ from the miner’s Q1 – forecasting that Rio would report quarterly iron ore shipments of 74.3 million tonnes.

Regardless, the Rio Tinto (RIO) share price surged close to 3% in the first 30-minutes of trade this morning – to about $91.18 per share.

A stable outlook

Positively for shareholders, Rio Tinto also took the chance to reiterate its previously stated 2020 iron ore shipments guidance of between 324 million tonnes to 334 million tonnes and its unit cost guidance of $14-15 per tonne.

Better still, management flagged that Chinese demand continues to recover, even as the global outlook remains dominated by uncertainty.

'We will continue to monitor and adjust production levels and product mix to meet customer requirements in 2020, in line with our value over volume strategy, government imposed restrictions related to Covid-19.’

‘Demand for high-quality iron ores we produce remained strong in the first quarter of 2020, mainly driven by a combination of seaborne supply disruptions and solid demand from China's steel mills despite Covid-19 impacts,’ it was also noted.

Across the other majors, BHP is set to release their latest quarterly production figures on 21 April, while FMG is set to report on 30 April.

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