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News: FMG UPDATE 1-Rio Tinto keeps iron ore mines running at full steam

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    • Rio Tinto keeps 2016 iron ore guidance intact
    • Says Pilbara mines to ship 330 mln/t
    • Signs oversupply in China easing

    (Adds more data, forecasts)

    SYDNEY, July 19 (Reuters) - Rio Tinto (RIO) said on Tuesday it was on track to meet its full-year iron ore shipment guidance from its Australian mines of roughly 330 million tonnes, underscoring the strength of sales to China, despite concerns of oversupply.

    China's iron ore imports grew strongly in the first half of 2016 as cheaper imported ore replaced domestic output, while its steel production has also risen, fueled by expectations of higher domestic construction spending and rising steel exports.

    China accounts for roughly two-thirds of all seaborne trade in iron ore, and the strength appears set to continue with Thomson Reuters Commodity Research and Forecasts estimating 91.86 million tonnes will arrive at Chinese ports in July, the highest monthly total this year.

    Rio Tinto said its second-quarter production in Australia of 80.9 million tonnes was 8 percent higher than the second quarter of 2015 and 1 percent above the first quarter of 2016. Rio's share of production was 66.3 million tonnes.

    "Second quarter Pilbara iron ore sales achieved a run-rate of close to 330 million tonnes per annum in line with annual guidance," the company said in its second-quarter production report.

    Rio expected its smaller Canadian iron ore division to yield around 20 million tonnes this year, keeping global production guidance unchanged at 350 million tonnes for 2016.

    BHP Billiton (BHP) , whose mines run alongside Rio Tinto's in western Australia is targeting production of 260 million tonnes in fiscal 2016. BHP is due to release production data on Wednesday, but analysts expect it to miss its target by several million tonnes, owing to bad weather.

    Fortescue Metals Group (FMG), the world's fourth-biggest iron ore miner, earlier this month reported fiscal 2016 production of 169.4 million tonnes, above its April guidance for 165 million tonnes.

    While the seaborne iron ore market remains well-supplied, there are signs that over-supply has been diminishing faster than many expected, helping to push up prices.

    Iron ore prices averaged $55.96 a tonne in the second quarter, up from $48.75 in the first quarter.

    So far this year the China benchmark iron ore index <.IO62-CNI=SI> up almost 35 percent. The price rise is a boost for Rio Tinto, where every one dollar a tonne price hike over a year is worth roughly $350 million in revenue.

    China's iron ore imports jumped 9.1 percent to 493.7 million tonnes in the first half of 2016 compared to the same period last year, a gain of nearly 41 million tonnes.

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