Rio Tinto says it has the global supply chain leverage to manage steep diesel price rises, but smaller iron ore miners are at greater risk of capitulating to fuel pain.<\/p>\n
The mining giant has maintained full-year production cost guidance across its operations, including iron ore mines in the Pilbara region of Western Australia that provide the lion\u2019s share of its earnings and export dollars.<\/a><\/p>\n Rio said on Tuesday that it used about 1.6 billion litres of diesel a year, including more than 1 billion litres in the Pilbara, but could manage the fuel bill and maintain supply.<\/p>\n It was paying about US60c (83.6c) a litre for diesel in the Pilbara mines a year ago, and although the price has since doubled, every $US10 increase per barrel of oil adds just US15c a tonne to iron ore production costs. <\/p>\n \u201cDespite higher diesel prices steepening the cost curve, our cost position is resilient, underpinned by scale and global supply chain leverage,\u201d Rio said in releasing production results for the three months to March 31.<\/p>\n The miner\u2019s core iron ore, aluminium, copper and lithium operations remained largely unaffected by the conflict in Iran and on-and-off blockades of the Strait of Hormuz.<\/p>\n \u201cOn the supply side, the direct impacts on our operations have been limited, while our commodity prices have responded favourably,\u201d it said.<\/p>\n \u201cWe continue to monitor the evolving global impact closely and have contingency plans in place. However, we have relatively limited visibility of how the ongoing conflict will affect supply chains in the second half (of 2026).\u201d<\/p>\n Rio is tipping a tougher time for iron ore miners with higher production costs and without the scale of its Pilbara neighbours, BHP and Fortescue.<\/p>\n \u201cHigher energy costs are resulting in a lifting of the global iron ore cost curve, particularly for higher-cost suppliers whose cost base is typically more sensitive to the diesel price,\u201d Rio said.<\/p>\n Iron ore miner Fenix Resources warned last month that diesel supply problems were starting to bite in the wake of fallout from Cyclone Narelle hitting the WA coast and ports.<\/p>\n Chamber of Minerals and Energy WA chief executive Aaron Morey said most of the lobby group\u2019s members \u2013 which include the iron ore heavyweights and scores of mid-tier miners \u2013 were better off for diesel supply now than they were in March.<\/p>\n \u201cWe actually have a better situation now on the ground in areas like the Goldfields and the Mid West than we had in March, but we\u2019re not through this global energy crunch,\u201d he said.<\/p>\n Mr Morey urged governments to stay focused on the issue, warning that any diesel shortage would quickly lead to mine closures and job losses.<\/p>\n Rio confirmed on Tuesday that it was playing catch-up on iron ore production guidance after an estimated billion-dollar-plus hit to revenue from Cyclones Narelle and Mitchell. <\/p>\n In the case of Cyclone Narelle, it also battered production at both of Rio\u2019s bauxite mines in Queensland, leaving a trail of destruction across the top of Australia before crossing the WA coast just south of the Pilbara.<\/p>\n Rio, which abandoned merger talks with Glencore during the quarter, pointed to production growth in copper over the three-month period and the strength of its aluminium business and higher pricing for both commodities.<\/p>\n