Rio Tinto to Cut Australia Iron Ore Output by 10%

Rio Tinto will cut its 2008 iron ore shipments from Australia 10 percent to between 170 million and 175 million tons due to weakening demand from China, the company said on Monday.

Worker in an Alcoa plant.
Worker in an Alcoa plant.

The reduction by the world's second-largest iron ore miner reduces output by up to 20 million tons from its previously targeted output of around 190 million tons in 2008.

"Operations continue to perform well but demand has continued to decelerate," Rio Chief Executive Tom Albanese said in a statement.

The reduction was prudent in order to align production with revised requirements by its customers in light of a drop in Chinese demand in the fourth quarter, Albanese said.

"We believe this will be a short sharp slowdown in China, with demand rebounding over the course of 2009 as the fundamentals of Chinese economic growth remain sound," Albanese said.

BHP Doesn't Plan to Cut Iron Ore Output

"We have no plans to cut production and our strong balance sheet enables us to reinvest throughout the cycle," said BHP Billiton spokesman Peter Ogden.

With the Rio cuts, BHP remains the only large iron ore miner not to initiate production cuts this year in the face of sagging demand for ore from steelmakers.

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Brazil's Vale, the world's largest iron ore miner, announced on Oct. 31 it would cut its iron ore output by 30 million tons a year from November.

Steel prices have collapsed in recent months along with demand as the global financial crisis strangled growth prospects and developed economies faced what some say could be their first full-year recession since World War II.

Rio stock rose 8.6 percent by the European close. BHP Billiton , which is targeting Rio in an all-share, around $70 billion, unsolicited takeover offer, climbed 10.6 percent in European trading.