Rio Tinto aims to add more iron ore with stronger China outlook

The producer will spend $70 million to lift production at Gudai-Darri, its newest mine in Western Australia’s Pilbara region, according to Simon Trott, the company’s iron ore chief executive officer. It is also advancing work on future options including development of the giant Rhodes Ridge project, which could offer 100 million tons of capacity, he said.

Even as it forecasts China — the world’s largest consumer of iron ore — to soon hit a peak in steel consumption, Rio expects total demand will rise almost a quarter by 2050.

“In the next 10 years globally, just as many people are going to urbanize as in the last decade, and so iron ore will remain a very large and attractive market,” Trott told reporters Wednesday in Perth. “The mine developments that are needed to sustain that, at that scale, are enormous.”

Prices of iron ore have remained relatively resilient despite China’s underwhelming economic recovery from the pandemic, and amid weaker consumption in the nation’s property sector. Futures for the steelmaking raw material have fallen about 1% in Singapore this year.

China’s gross domestic product for the three months ended September expanded 4.9% year-on-year to beat economists’ expectations, offering some indications that government stimulus efforts are having an impact.

Fiscal support has targeted “infrastructure spending, manufacturing and consumption, which has helped underpin commodity demand in the automotive, home appliance, ship-building, transport and utility sectors,” Will Millsteed, Rio’s head of market analysis, told reporters. China’s government-backed construction has also “consistently and considerably outperformed developer-led activity over the past year,” he said.

London-based Rio is engaging with China Mineral Resources Group Co., the buying agency established by Beijing in an effort to give the top importer more power over pricing, according to Trott.

“We’ll continue to do that in the most constructive way,” he said. “It’s in everyone’s interest that we see a deep, liquid iron ore market, and one where pricing reflects the fundamentals of supply and demand.”

The state-owned group is handling negotiations on long-term contracts for mills including China Baowu Steel Group and Ansteel Group and seeking preferential terms on transport, grades and delivery arrangements, people familiar with the details said earlier this month.