Rio upbeat on iron ore growth

Rio Tinto has mapped out a positive future for its expanding iron ore business, predicting more efficiency gains in the Pilbara, less competition from other producers and more growth in global demand.

At an investor briefing in Sydney today, the company stood by its prediction that Chinese steel production will lift to 1 billion tonnes by 2030.

Rio's iron ore chief executive Andrew Harding said the company was confident in its ability to build value through the cycle.

"We are clearly going through a period of adjustment as China moves towards a more consumer-led economy but we see continued growth in global iron ore demand over the long term," Mr Harding told investors.

Rio predicted faster growth in other emerging markets, with non-Chinese steel demand tipped to grow by 65 per cent by 2030.

Overall, the company expects global iron ore demand to expand by 2 per cent a year to 3 billion tonnes by 2030.

To put that in context, the three big Australian producers – Rio Tinto, BHP Billiton and Fortescue Metals Group – have production capacity of 810 million tonnes per annum.

Rio’s view is that new supply will be needed, especially as high-cost producers exit the market.

It has tipped that 120mtpa will exit the market this year, with Chinese domestic supply to fall by 45mt and seaborne supply to fall by 75mt, mainly from west African suppliers.

Rio has predicted continued steady growth in its own production in the Pilbara.

From about 320mt this year, it expects production to increase to 335mt in 2016 and 350mt the following year.

That will come from incremental investment in existing mines such as Nammuldi; the company said its next big mine development at Silvergrass remained subject to approval in 2016.

Mr Harding said there were more opportunities to lift productivity and efficiency in the Pilbara following a reduction in cash costs to just above $US15 a tonne.

Maintenance costs will be cut by $200 million a year over the next three years, Rio said.

The company's iron ore operating costs have already been reduced by $US1 billion compared to 2012, and it has about 400 initiatives under way to identify further savings and ways to lift productivity.