(Updates with closing share price in fifth paragraph.)
April 15 (Bloomberg) -- Rio Tinto Group, the world’s second-largest mining company, said first-quarter iron ore production rose to a record, swelling global supply that’s forecast to head into surplus this year.
Output rose 8 percent to 52.3 million metric tons from 48.3 million tons a year earlier, London-based Rio said today in a statement. That missed the 54.7 million-ton median estimate of seven analysts surveyed by Bloomberg after bad weather affected mines and ports.
At the same time as reining in spending and cutting costs companywide, Chief Executive Officer Sam Walsh has been driving an expansion of Rio’s iron-ore unit, the biggest contributor to earnings. Prices plunged into a bear market during the quarter as inventories ballooned to the highest ever in China.
“The interesting thing will be how he manages possible oversupply into China,” Evan Lucas, a Melbourne-based markets strategist with IG Ltd., said by phone. “The question is whether or not they do get hit by price deceleration like we’ve seen over the last quarter.”
The stock advanced 0.1 percent to A$63.35 at the close of trading in Sydney. The benchmark S&P/ASX 200 Index gained 0.6 percent.
“Rio Tinto has started the year with a series of performance records as we continue to drive productivity gains across our operations,” Walsh said according to the statement. “Our Pilbara iron ore business has again set new benchmarks for production, shipments and rail volumes for the first quarter.”
Slowing steel production growth in China will hurt demand for iron ore and there’s potential for “further large downside price reactions,” Goldman Sachs Group Inc. said in an April 13 report, in which it said it was “bearish” on iron ore.
Growth in China may have decelerated to 7.3 percent during the first three months of the year, down from 7.7 percent, according to a Bloomberg News analyst survey ahead of data to be released tomorrow.
Rio is cutting capital spending to about $8 billion in 2015, less than half its outlay in 2012. Walsh, a 23-year company veteran, has reduced costs by $2.3 billion and driven productivity gains since becoming CEO in January 2013 amid an industrywide push to preserve profitability as some commodity prices slide.
Rio produced 156,500 tons of mined copper in the quarter, 17 percent higher than a year earlier. Refined copper output rose 4 percent to 75,800 tons.
Total production at the Oyu Tolgoi mine in Mongolia was 25,300 tons of mined copper, Rio said. Customers collecting copper concentrate from a bonded warehouse in China is ramping up, with the sale of 13,100 tons of copper during the first quarter. Chinese buyers last year faced a four-month delay in receiving approvals to collect their orders.