The slumping global economy has cut demand for steel, and lower demand for steel has cut demand for iron ore. The CEO of Rio Tinto plc (NYSE:RTP) put some numbers on that today. Rio’s iron ore production for the first quarter of 2009 was down 15% compared with the first quarter of 2008. Production was “in line” sequentially. The company is bracing for lower production throughout 2009.
Production of bauxite was down 19%, alumina down 2%, and aluminum down 6% year-over-year, but flat sequentially. Rio also closed a Canadian aluminum smelter in January, further reducing production. All told, the company is planning an 11% reduction in aluminum production in 2009.
The company is still counting on the investment from China’s aluminum giant, Chinalco, to pull its chestnuts out of the fire. The $19.5 billion investment is under scrutiny by Australian regulators.
Rio also noted that it had sold $2.5 billion worth of assets and experienced “no significant movement in net debt” during the quarter. That’s good news, since the $38 billion in debt from Rio’s purchase of Alcan is probably quite enough.
Rio’s shares are off about 2% in early trading, at $142.90. The 52-week range is $59.20-$558.65.
Paul Ausick
April 15, 2009
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