RIO Tinto appears increasingly likely to delay a $5.4 billion iron ore mine expansion in Western Australia, possibly leaving global iron ore markets under-supplied and backing up claims by new Arrium chief Andrew Roberts that pundits predicting price slumps are factoring in too much new supply.
After a detailed review of Rio's plans to ramp up the final 70 million tonnes of annual iron ore production in its expansion plans, JPMorgan has predicted the miner will delay its iron ore ramp-up by three years from its current 2016 target. Rio has started building the port and rail capacity but not yet committed to mine expansion.
Like all big miners, Rio is reining in spending and costs amid a lower demand and price outlook, and has said it has options for mine expansion beyond its original plan to quickly build bigger mines to serve its infrastructure expansion from 290 million tonnes a year to 360 million.
"The decision to add 70 million tonnes a year of mine capacity appears to be taking longer than previously outlined by the company, suggesting Rio may be pursuing a go-slow option," JPMorgan analyst Lyndon Fagan said in the report.
