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Rio Tinto (ASX:RIO) share price in focus following Q3 update

Rio Tinto share price

The Rio Tinto Limited (ASX: RIO) share price will be on watch this morning following the release of its third quarter production update.

How did Rio Tinto perform in the third quarter?

For the three months ended 30 September, Rio Tinto reported Pilbara iron ore shipments of 82.1Mt.

This was a 5% decline on the prior quarter and a touch lower than expectations. Goldman Sachs, for example, was forecasting iron ore shipments of 83.3Mt for the quarter. Management advised that this reduction in shipments was due to planned maintenance activity in its port.

However, iron ore production was strong at 86.4Mt. This was a 4% lift on its second quarter production. Management notes that its Pilbara operations are returning to more normal operating conditions with rosters back to pre-COVID-19 settings.

Rio Tinto’s mined copper came in a 129.6kt for the quarter. While this was down 2% on the prior quarter due to smelter issues at Kennecott, it was significantly higher than the 91kt predicted by Goldman Sachs. And given the recent strength in the copper price, this can only be good news for shareholders.

Elsewhere, Rio Tinto reported a 1% decline in Bauxite production to 14.5Mt, a 2% lift in Aluminium production to 797kt, and a 12% increase in Titanium dioxide slag production to 293kt.

Market conditions.

Management provided commentary on market conditions in the third quarter and its expectations for the months ahead.

It commented: “Global economic activity in the third quarter was generally strong, helping to sustain optimism for a widespread recovery in 2021. However, recent high-frequency data suggests that the rate of recovery in growth is slowing in most economies, with pent-up demand dissipating, and the rise of renewed lockdowns threatening recovery.”

The company also spoke about iron ore demand, which has been incredibly strong recently.

Management advised: “Chinese iron ore demand is at record levels against a backdrop of recovering seaborne supply that was disrupted earlier in the year.”

“However, with the major producers expected to deliver strong volumes in the fourth quarter, iron ore inventories are expected to grow modestly as China’s steel consumption eases from record highs and scrap consumption increases. Japan, South Korea, Taiwan and Europe continue to show signs of recovery: however, exChina steel production remains down significantly year on year,” it added.

Outlook.

Rio Tinto has made no major changes to its production guidance for the remainder of FY 2020.

It continues to expect Pilbara iron ore shipments of 324Mt to 334Mt this year, up from 327Mt in FY 2019. And mined copper is expected to be in the range of 475kt to 520kt.

Its cost guidance for both remains unchanged as well. Pilbara iron ore unit cost guidance remains $14 to $15 per tonne and copper C1 unit cost guidance stays at 120-135 US cents per pound.

This guidance is based on an average Australian dollar exchange rate of US$0.67.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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