China now Rio Tinto's biggest customer

Includes material from Lloyd’s List Daily Commercial News - www.lloyd’slistdcn.com.au

Rio's 2009 calendar year results, released in London on February 11th, showed a quarter of the company's record 217 million tonne production went to China.
Tom Albanese, Rio Tinto’s chief executive said, “The Group delivered exceptional operational performance, either meeting or exceeding our production targets, and our rigorous cost reduction program delivered $2.6 billion in savings, beating our target one year in advance.”
Whilst trading conditions were tough in the first half, the second half was much improved, with the benefits of Rio’s actions on costs, increased production and better markets all making a contribution.
“Our iron ore business in the Pilbara consistently operated above its nameplate capacity of 220 million tonnes per annum during the second half of the year and set new sales and production records for the year as a whole,” said Albanese.
He said the “vast majority” of its iron ore was sold to long-term clients in the second half of 2009 “either at a benchmark rate basis, or a provisional price for Chinese customers. But in the first half of 2009 as much as 50 per cent was sold on the spot market, as it failed to reach agreements with steel mills over cuts to prices, he said.
The world’s second-largest iron ore producer said demand for iron ore would outstrip supply in 2010 and demand had never been stronger in China.
“Despite the volatility of the past year, we still believe that we are experiencing a secular uplift in demand for commodities. Our long term outlook remains strong as China, followed by India, continues to urbanise and industrialise over the next two decades,” said Albanese.
Chinese iron ore imports are forecast to drive seaborne trade in iron ore past 1 billion tonnes in 2010.
“We look forward to completing the iron ore production joint venture which came one step closer following the signing of binding agreements at the end of last year,” said Albanese.
The results showed a 33 per cent lift in Rio's full-year net profit, though underlying net profit fell 39 per cent to $7.1 billion.
There was a return to profitability for the Aluminium product group in the second half following a $0.8 billion half-on-half improvement in its underlying earnings.
Strong volume gains, primarily from iron ore sales and a significant increase in copper and gold production, boosted earnings by $652 million year-on-year.
Separately, Rio Tinto shipped 150 million tonnes of bulk commodities in the year ending 2009.
Volumes shipped via its London-based Rio Tinto Marine shipping subsidiary were up by more than a third on 2008 levels of 100 million tonnes and three times levels seen in 2007.
Rio Tinto has ramped up dry bulk cargo shipments from its marine subsidiary over the past two years to become an influential driver of bulk carrier rates on key coal and iron ore trading routes.
The company has three very large ore carriers on order at Asian shipyards for delivery from 2012.