Rio Tinto extracted record volumes of iron ore in Australia in 2014, adding to the global oversupply of the commodity which pushed prices to its lowest levels in five years, the Sydney Morning Herald has reported.
The mining giant posted an 11% increase in full-year production of iron ore to 295.4 million metric tonnes, which is slightly above its projected annual target of 295 million tonnes, as well as an increase in copper production despite the softening price of the industrial metal.
Analysts say that Rio Tinto’s ramp up in production of iron ore in the Pilbara region was executed in hope that China will need more of the commodity to make steel for its skyscrapers and for its automotive industry, despite the slowdown in the country’s economy.
However, Rio’s strategy of flooding the market with iron ore seems to have backfired, as several major banks, including Citigroup and UBS, recently scaled back their forecasts for iron-ore prices, predicting a full-year average of just US$58 a tonne for 2015.
Despite the negative forecasts, Rio said it was planning to mine 330 million tonnes from its Australian mines in 2015, relying on the magnitude of its business to produce material profitably and at a significantly lower cost than competitors.
Andrew Harding, Rio Tinto’s iron-ore chief, said the company aims to increase production of iron ore in the Pilbara to at least 350 million tonnes by 2017 and has spent billions of dollars to build more berths at its Cape Lambert port and expand rail lines in the Pilbara.
He said if the management pulled out from its production target, its competitors, such as BHP Billiton and Fortescue Metals Group Limited, would simply take the opportunity to grab a bigger market share.