At an investor seminar in Sydney yesterday, Rio Tinto outlined the next phase in its long-term strategy to capitalize on the growing global demand for high-quality iron ore through a relentless focus on productivity and efficiency, technology, and people development to drive costs lower at its Pilbara operations.
Rio Tinto also revealed new details on the data underpinning its projections for 2.5% average annual growth for steel demand across China and the rest of the world over the next 15 years. This rigorous analysis, according to the company, confirms that Chinese crude steel production is expected to reach around 1 billion metric tons (mt) by 2030. Emerging markets will also play an increasingly significant role in the iron ore market, with non-Chinese steel demand expected to increase by 65% by 2030.
Rio Tinto has invested $14.7 billion in its Pilbara infrastructure and mine development projects, which employ more than 10,000 people. Since 2012, the company has reduced iron ore operating costs by almost $1 billion. The company said its cash costs amounted to $16.20/mt in the first half of 2015, compared with $20.40/mt for the same period last year. Rio Tinto said it consistently achieves a higher average price than all other Pilbara producers and its Pilbara Blend is very popular with steelmakers.
“As we move into our 50th year of exports from Australia, Rio Tinto is embarking on a new phase in our iron ore business,” said Rio Tinto Iron Ore Chief Executive Andrew Harding. “We have spent the past decade building the best iron ore business in the world — a project that has come in on time and below initial cost estimates. We now intend to optimize these new assets. We are also focused on realizing further costs savings through some 400 efficiency initiatives across the Pilbara.”
Rio Tinto moved 400 million mt of material by autonomous trucks in the Pilbara. The company said its autonomous trucks are 12% more productive than the manned fleet and there has been a 13% reduction in load and haul costs due to autonomous truck efficiencies. Autonomous drills have an availability that is 10% higher than manned drills, resulting in an operational savings of 8%.
“Our sector-leading Mine of the Future program is already delivering significant group-wide productivity improvements,” said Rio Tinto Technology and Innovation Chief Executive Greg Lilleyman. “Rio Tinto’s first-mover status in autonomous equipment has resulted in significant productivity gains while our use of big data analytics has allowed us to safely extend maintenance cycles.” Using predictive analytics and enhanced maintenance planning systems, Rio Tinto expects to reduce maintenance costs by $200 million a year over the next three years.
Rio Tinto believes that global iron ore demand will increase to 3 billion mt by 2030. In the near term, however, the company expects at least 120 million mt of marginal iron ore supply to exit the market in 2015 with a further 45 million mt “at risk” of exiting.