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16 Oct 2015
Rio Tinto (RIO) shares are failing to derive any benefit whatsoever on this risk-on day from a Q3 production update reporting iron-ore shipments +12% QoQ/+17% YoY and thus supportive of growth. While a decent headline grabbing statistic, and suggestive of 
growth, it is unfortunately easily countered by Copper production -24% YoY, underscoring weak demand for the key industrial metal.
A cut to Copper production guidance towards the lower end of the prior range (repairs to blame) will help restrict supply and keep the price of the red metal off 6yr lows. However, it is likely that in the face of slowing growth in China (consumes 40% of global Copper production) only through significant production cuts (such as that demanded of rivals by Glencore’s Ivan Glasenberg) or a major revival of growth/demand (stimulus led?) will we see the metal break above September highs and help RIO shares above their own July/Aug resistance around 2600p. Ironically GLEN benefiting more (+4%), perhaps thanks to its consideration as a proxy for Copper seeing it welcome news of slightly lower production, in-line with its recent calls, as well as continued bargain hunting in the battered miner’s share price.
Mike van Dulken, Head of Research
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