Rio Tinto’s iron ore exports fell in 2021 amid labour crunch

Mining giant Rio Tinto has reported a drop in its yearly shipments of iron ore, the nation’s most valuable export, after a labour squeeze in Western Australia and pandemic-related supply chain disruptions delayed the commissioning of new resources projects last year.

Rio Tinto, the top producer of the key steel-making raw material, told investors on Tuesday it had shipped 84.1 million tonnes of ore from its Pilbara operations in the December quarter, in line with its target and analysts’ expectations, but 5 per cent lower than the same time in 2020.

Rio Tinto is Australia’s biggest miner of iron ore, the key steel-making raw material.
Rio Tinto is Australia’s biggest miner of iron ore, the key steel-making raw material.Credit:Louie Douvis

The result brings Rio Tinto’s total shipments of iron ore last year to 321.6 million tonne, down 3 per cent from the year before.

Rio Tinto chief executive Jakob Stausholm said operating conditions remained “challenging” including due to prolonged pandemic-related disruptions across its operations.

“Despite this, we progressed a number of our projects, including the Pilbara replacement mines, underlining the resilience of the business,” Mr Stausholm said.

The mining giant in December cut 5 million tonnes from the bottom line of its iron ore target, citing a “tight labour market” in WA’s Pilbara mining heartland, which had held up new iron ore mine developments including the $US2.6 billion Gudai-Darri project. Production had also slowed across Rio’s operations due to above-average rainfall and an enhanced focus on Indigenous heritage issues following its ill-fated destruction of the 46,000-year-old Juukan Gorge rock shelters in 2020, which devastated the land’s traditional owners and plunged the company into crisis, leading to the resignations of its former chief executive and chairman.

Across WA, the world’s biggest iron ore region, mining industry leaders say a chronic labour squeeze has been exacerbated by ongoing pandemic-related border restrictions that have reduced the mobility of fly-in, fly-out staff between states. At the same time, miners are having to compete harder for skilled workers amid a government-backed construction boom on the east coast.

“Ongoing COVID-19 restrictions and a tight labour market have further impacted our ability to access experienced contractors and particular skill sets,” Rio Tinto said.

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There are hopes the labour shortage in the WA mining industry could be reduced after February 5, the date which the state has flagged it may allow quarantine-free travel from other parts of Australia. However, the highly infections Omicron variant of COVID-19, which has caused crippling workforce shortages and supply chain disruptions across many other industries, raises the risk of another significant threat to mining labour availability.

Rio Tinto on Tuesday set a new target to lift exports this year to between 320 million and 335 million tonnes of iron ore from Western Australia, but warned its guidance assumed the outbreak of further coronavirus cases related to the “new highly contagious variants” did not lead to further government-imposed restrictions.

The price of iron ore experienced a stunning rally in 2021 to hit a record-setting $US230 a tonne, underpinned by an aggressive infrastructure-focused building blitz in China, which fuelled enormous demand for steel at the same time as drawn-out supply disruptions dragged on iron ore mines in Brazil. The boom delivered huge profits and bumper dividends for shareholders of top Australian miners BHP, Rio Tinto and Fortescue, and helped bolster the nation’s finances during the depths of the COVID-19 crisis. In 2021, iron ore accounted for $153 billion in export earnings, an all-time high.

However, the iron ore price fell sharply in the second half of the year as Beijing deepened production cuts across its steel mills to reduce emissions from one of its worst-polluting industries and global supply began to pick up.

While China’s steel production rose again in December to its highest level since August and helped bring iron ore back above $US120 a tonne, investment bank UBS said it remained “cautious” on the outlook for the commodity.

“We expect demand to be weak and supply to lift in 2022,” UBS analyst Myles Allsop said.

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Source: Thanks smh.com