The share price of Rio Tinto Limited (ASX: RIO) is outperforming the market in early trade as investors cheered its March quarter production report.
Rio Tinto is trading 1% higher at $78.89 when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index is up 0.3% this morning.
Management reported an increase in production for just about all its key commodities with iron ore shipments from its Pilbara mine improving 5% in the first quarter of this calendar year over the same time last year to 80.3 million tonnes, while production is up 8% to 83.1 million tonnes.
Iron ore makes up about half of Rio Tinto's group revenue and management has reaffirmed its original iron ore production guidance of between 330 million and 340 million tonnes for 2018.
"We delivered a solid operational performance across most commodities in the first quarter of 2018," said Rio Tinto's chief executive J-S Jacques.
"Our world-class Pilbara iron ore assets continue to demonstrate flexibility and the benefits of increased productivity, and production at our bauxite and copper assets was also higher."
Copper recorded the biggest jump in the latest quarter as production surged 65% to 139,300 tonnes. This because production in the previous corresponding period had been impacted by union strike action at its giant Escondida copper mine in Chile.
Bauxite was up 12% to 12.7 million tonnes due to ongoing operational improvements, while aluminium, hard coking coal and titanium dioxide slag fell.
There were no negative surprises in the production update although the miner may cut its aluminium production forecast due to the US sanctions against Russian aluminium producer Rusal, which is a 20% co-investor in Queensland Alumina Limited and has offtake contracts with Rio Tinto's smelters that are largely in France and Iceland.
I have been overweight on Rio Tinto and its peer BHP Billiton Limited (ASX: BHP) for a while and today's report gives me few reasons to change my nearer-term outlook for the sector even as iron ore prices have been giving back some of their strong gains recently.
The steel making ingredient has lost close to 20% since it hit a high of US$77 a tonne two months ago and is currently sitting just above US$60 a tonne.
Expectations of accelerating global economic growth and the focus by a number of governments, including those in the US, Australia and China, should provide good support for iron ore prices through 2018.
This also puts miners like copper producer Oz Minerals Limited (ASX: OZL) and nickel producer Independence Group NL (ASX: IGO) in a strong position to outperform.
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