SINGAPORE/MELBOURNE, May 6 (Reuters) - Rio Tinto, the most profitable iron ore producer, is in a strong position to keep its mines running at full tilt, even as rivals BHP Billiton and Brazil’s Vale apply the brakes in a market suffering a supply glut.
Despite a plunge in ore prices, Rio Tinto is not expected to face pressure from shareholders at its annual general meeting in Perth on Thursday to alter expansion plans.
The world’s second-biggest iron ore producer said in February in would return $2 billion to shareholders via a buyback and its stock has outperformed its rivals.
Rio’s shares are down less than 4 percent in the last 12 months, compared with BHP’s 14 percent drop and Vale’s 20 percent decline.
The top three iron ore miners had up until recently resisted calls to curb output, vowing to lift production to gain more share of top market China and force out higher cost miners.
Rio plans to ship around 350 million tonnes in calendar 2015, up from 300 million tonnes last year.
The firm’s long-term plan is to reach a production capacity of 360 million tonnes per year.
But Vale, which is grappling with high debt, and BHP appeared to blink in recent weeks by flagging they would curb iron ore expansion plans or trim production.
“I don’t think Rio will touch their existing operations. They have much better economics of production compared to Vale,” said Georgi Slavov, head of research at Marex Spectron.
Rio has been the most successful in cutting costs among the big three, producing and delivering a tonne to China for just $34. That means it makes a healthy margin even at the decade-low price of $46.70 hit last month.
Vale said last week it could cut iron ore output by up to 30 million tonnes over the next two years, in a major strategy shift as it focuses on improving margins after a price slump pushed it to a third straight quarterly loss.
Vale’s decision followed BHP announcing on April 22 that it would delay an Australian port project that would have boosted output by 20 million tonnes.
Before this, the top three, which account for about two-thirds of global supply, had appeared impervious to calls from rivals and some Australian politicians to change a strategy blamed for forcing iron ore prices down 60 percent in a year.
The mega producers have also been slammed by smaller rival Fortescue Metals Group for flooding the market with ore just as demand growth in China slowed, but Rio has long said it makes no sense for the lowest cost producer to hold back supply.
“Rio is likely to produce to the max. That’s their culture,” said Mike Harrowell, director of resources research at broker BBY Ltd.
A Rio Tinto spokesman declined to comment on production plans.
Despite their announcements, Vale and BHP are sticking to their long-term expansion plans, with the Brazilian miner set to lift output to 453 million tonnes by 2018 from a projected 340 million tonnes this year.
“Their optimal strategy remains to increase supply, especially for BHP and Rio. For Vale it may be a little bit difficult because they are lagging somewhat behind compared to the other two in terms of bringing the expansion to the market,” said Julius Baer analyst Carsten Menke. (Editing by Ed Davies)