Minor bulks generate billions for major miner Rio Tinto

Pictured: a bauxite handling, storage and export facility in northern Australia; Photo: Shutterstock

Australian miner Rio Tinto generated over US$12 billion (all figures in U.S. dollars) from its bauxite, alumina and aluminum production in 2018. It predicts about 67 million tonnes production of bauxite, alumina and aluminum this year. These minor bulk commodities are significant seaborne cargoes.

While Rio generated consolidated revenues of $40.5 billion, about $12.2 billion was generated by aluminum-related production. Bauxite is the ore from which alumina, a compound of aluminum and oxygen, is obtained. The metal aluminum is then smelted from alumina.

Of that $12 billion generated, Rio earned $2.3 billion from bauxite. This includes freight revenues of $371 million. It also earned $3.3 billion from alumina. It earned another $9 billion from its aluminum subsidiaries and divisions. The remainder of the $12 billion was earned from other aluminum-related operations. Aluminum is especially valuable, having an average price in 2018 of $2,470 a tonne.

Bauxite volumes in 2018 were 50.4 million tonnes, marginally down from the 2017 figure. Alumina production was just under 8 million tonnes, also down marginally from the 2017 numbers.

Aluminum production was 3.5 million tonnes, down by 3 percent from 2018. Lower volumes were produced owing to labor disruptions in Canada and power operations at a smelter elsewhere.

Rio said that there was “strong” production at its mines in Australia but this was offset by lower production at “two non-managed operations.”

The company remarked that its aluminum business was “stable” despite market volatility from tariffs, sanctions and supply disruptions, along with rises in input prices for key raw materials. The company pointed to higher costs for caustic soda, petroleum coke, tar pitch and also for higher-cost energy prices driven by higher thermal coal costs.

Looking forward, exports of bauxite are likely to increase as the company made its first shipment from the Amrun project in north Queensland. Amrun is expected to produce at its full capacity of 22.8 million tonnes a year. However, that volume is offset by lower volumes from declining mines elsewhere.

Rio advises that the project will result an extra 10 million tonnes a year. Assuming a capesize dry bulk vessel of 100,000 deadweight, with a deduction of, say, five percent for internal stores, fuels and lubes, that total production equates to an extra 105 or so capesize voyages per year. Of course, that will very much depend on the size of the chartered capesize vessels that are deployed.

In its market outlook, Rio forecasts increased demand for aluminum from the North American and Chinese construction and packaging markets. Strong growth in seaborne bauxite demand from China is also forecast, which will likely be met by Australian and Guinean exports.

Rio expects its share of production in 2019 to be between 56 and 59 million tonnes of bauxite, 8.1 to 8.4 million tonnes of alumina and 3.2 to 3.4 million tonnes of aluminum.