In the fourth quarter of 2022, Rio Tinto (NYSE:RIO) shipments of iron ore went up 4% year over year to 87.3 million tonnes (Mt), while production went up 6% to 89.5 Mt. This made shipments of iron ore stay the same from 2021 to 2022, at 321.6 Mt. Iron production was 324 Mt, which is 1% more than the year before thanks to efforts to improve performance and a record-setting performance in the second half of the year in both the mine and rail system. RIO Stock fell 2% on Tuesday despite the positive numbers.
Even though there were problems with equipment reliability at Weipa and Gove in Australia, 54.6 million tonnes of bauxite were expected to be made in 2022, which is 1% more than in 2021. The Kitimat smelter in British Columbia, Canada, and the Boyne smelter in Queensland, Australia, both made less aluminum in 2022 than they did the year before. This is why the amount of aluminum made dropped by 4%. In the fourth quarter, there were more pot restarts at Kitimat, and work is being done to fix the Boyne smelter cell. The full ramp-up should be done by the year 2023. All of the other aluminum smelters kept getting the same results.
In 2022, 521 thousand tonnes of copper were mined, which is 6% more than in 2021. This was due to higher grades at Kennecott and Escondida, which were partially offset by lower grades and recoveries at Oyu Tolgoi, which were planned. In the fourth quarter of 2022, Kennecott’s anode furnaces were shut down for maintenance that wasn’t planned.
If the production of anodes stays low, the production of cathodes will almost certainly be low in the first quarter of 2023. The performance of the smelter and refinery will make it hard for Kennecott to keep making refined copper. Rio is planning the biggest rebuild in nine years, starting in the second quarter of 2023 and taking three months. This will get better over time.
Guidance for 2023
Rio Tinto thinks that the total amount of iron ore shipped from Pilbara will be between 320 and 335 Mt in 2023. The middle of the range shows a 2% increase from last year. In 2022, 55 million tonnes of bauxite were made. By 2022, 54 to 57 million tonnes of bauxite will be made. Guidance on shipments from Pilbara is still based on how shipments from new mines and the management of cultural heritage are going.
The amount of alumina made is expected to be between 7.7 and 8.0 Mt, which is more than the 7.5 Mt made in 2022. The amount of aluminum made should be between 3.1 and 3.3 Mt, up from 3.0 Mt in 2022.
Mined copper production is expected to be in the 650 kt to 710 kt range in 2023. The middle of the band shows a growth of 31% from one year to the next. Rio Tinto’s stake in the Oyu Tolgoi mine went from 33% to 66% when it bought Turquoise Hill Resources (which was finished in December 2022).
Refined copper is expected to be between 180 and 210 kt, representing a 7% year-on-year decline at the midpoint. The amount of diamonds made is expected to drop from 4.7 million carats in 2022 to 3-3.8 million carats in 2030. In 2023, the amount of titanium dioxide slag that will be made is expected to be between 1.1 Mt and 1.4 Mt.
Guidance for the 2023 unit cash cost of Pilbara iron ore is between $21 and $22.5 per tonne, and the unit cost of copper C1 is between $1.60 and $1.80 per pound.
Rio Tinto’s competitor, BHP, plans to make between 249 Mt and 260 Mt of iron ore in fiscal 2023. The middle of the range shows a 1% increase over the previous year’s output. The company anticipates copper production of 1,635-1,825 kt, representing a 10% increase at the midpoint over the previous year’s reported figure.
Throughout 2022, repeated COVID lockdowns made people worry that Chinese demand would be low. This made iron ore prices go down. Copper prices have also fallen due to weak Chinese demand and global economic uncertainty.
So far this year, iron ore prices have increased because China has eased some of its restrictions. The World Steel Association says that the steel demand will go up by 1% in 2023 to reach 1,814.7 Mt. Infrastructure needs will keep up the steel demand. On the supply side, bad weather in Brazil and possible cyclones in Australia will likely cause iron production to drop. This will help the price of iron ore.
Copper prices have also gone up so far this year. This is because there are worries about supply, but solid demand is expected because of the trend toward energy transition. Copper and iron ore prices are increasing, which is good news for miners like Rio Tinto and BHP.
RIO Stock Performance
In a year, RIO stock has gone up 2.4%, while the industry as a whole has gone down 2.1%.
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