Analysts believe Rio Tinto has overcome slow start to meet iron ore target

Rio Tinto's slow start to iron ore shipping in 2015 will not prevent it from meeting its iron ore export target, analysts say.

Rio will reveal its December-quarter results on Tuesday morning, and several analysts believe the company lifted exports by more than 4 per cent above the September quarter to meet the target.

Ore with 62 per cent content delivered to Qingdao fell 0.9 per cent to $US54.54 a tonne on Friday, the lowest since April 8.
Ore with 62 per cent content delivered to Qingdao fell 0.9 per cent to $US54.54 a tonne on Friday, the lowest since April 8. Photo: Louie Douvis

Rio needed to ship about 95 million tonnes in the December quarter to meet its annual target of 340 million tonnes, and Citi analysts believe the company exported 94.953 million tonnes in the final three months of the year.

Shaw and Partners analyst Peter O'Connor agrees, suggesting the company would rely on some stockpiled ore to achieve the target.

Rio has acknowledged the stockpile trend cannot go on forever, and is expected to have run down its stockpiles by mid-2016.

If Rio has shipped 95 million tonnes in the December quarter, it will be easily the best performance of the year; it shipped 72.5 million tonnes in the March quarter of 2015 and has never done better than the 91.2 million tonnes shipped in the September quarter.

But it is important to note the 340 million tonnes a year target was not the original target; Rio originally planned to export almost 350 million tonnes in 2015 but had to downgrade that to 340 million tonnes in July after bad weather hampered the first half of the year.

Iron ore prices fell by 39 per cent during 2015 and were fetching $US41.12 a tonne on Monday.

Citi believes Rio's diamonds and coking coal divisions will also post strong December quarters on the back of mines increasing production.

Citi predicted coking coal volumes would rise by 40 per cent above those achieved in the September quarter on the back of the Kestrel mine in Queensland returning from maintenance.

Diamond volumes are tipped to rise 18 per cent quarter on quarter thanks to the increased activity of the Argyle diamond mine in Western Australia.

Rio chief executive Sam Walsh recently told staff that 2016 would be a difficult year because of the weak commodity prices on offer, and investors will be keen to hear whether Rio will give up on its long-term goal of exporting 360 million tonnes a year.

"We will continue our pursuit of greater productivity, and we will seek to do things differently wherever there's a possibility of generating incremental cash. We also need to continue to drive down our costs in order to preserve cash. I can see that we are doing this across the business with war rooms to focus efforts, hundreds of creative initiatives, and some great results, but we need to go further," said Mr Walsh in his recent note to staff. 

"If there is a better, cheaper or more efficient way of doing something then let's do it that way. If something is not essential, stop doing it."

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