RPT-COLUMN-Can Rio Tinto's iron ore strategy work for shareholders?: Russell
(No changes to text)
By Clyde Russell
LAUNCESTON, Australia, July 16 (Reuters) - Rio Tinto's announcement of a reduction of 10 million tonnes in its forecast shipments of iron ore to 340 million tonnes in 2015 is largely inconsequential.
The small, weather-related drop in the forecast won't make much difference to a global seaborne market that is still vastly oversupplied, however, it does provide an opportunity to review just how Rio Tinto's strategy is working out.
The key sentence for iron ore in the quarterly output report released Thursday was that the "focus is now on generating maximum value from the assets, including debottlenecking and productivity improvements".
This shows that Rio Tinto is sticking to its guns in taking the approach of getting the capacity of its mines in Western Australia state to 360 million tonnes, and then running them as hard and as efficiently as possible.
In doing so Rio Tinto is trying to convince its investors, and the market at large, that a long-term strategy of being the lowest cost producer will eventually pay dividends as higher-cost producers leave the market.
Again, there's nothing new in this strategy, it's been Rio Tinto's stated position for some time now.
Problem is that it's also the stated position of Brazil's Vale, the top-ranked iron ore exporter at risk of losing the title to Rio Tinto, as well as BHP Billiton, the number three producer. Continuación...