Rio Tinto force majeure after Cape Lambert fire: Update

Adds market reaction in paragraphs 6-10

UK-Australian mining firm Rio Tinto has declared force majeure on shipments of its Robe River iron ore fines and lump following a fire at Cape Lambert port in Western Australia (WA) that is connected to its mines in the Pilbara region.

The fire which broke out on 10 January at Cape Lambert port caused damage to a section of the Robe River screen facility that separates Robe Valley lump and fine products, Rio Tinto said.

"The fire has had no impact on the shipping of all other Pilbara iron ore products," the company said.

Rio Tinto's share of Robe Valley lump and fines production was 8.7mn t in the six months to 30 June 2018. The company has a 53pc share in the port, which can handle 205mn t/yr of iron ore, with Japanese firms Mitsui and Nippon Steel owning 33pc and 14pc respectively. Rio Tinto exports iron ore from WA's Cape Lambert and Dampier ports.

Rio Tinto will report its October-December production data on 18 January.

The force majeure announcement may support seaborne prices, as the supply disruption comes as mills restock for the lunar new year holiday early next month and the spring season that starts in late February. But any upside to prices may be limited as the force majeure does not include Rio Tinto's best-selling products PB fines and PB lump.

Robe Valley fines competes with grades such as Yandi fines and fellow Australian producer Fortescue's blended and SSF fines in the low-grade ore category.

The force majeure may lead to a rise in demand for Yandi fines because of its low phosphorus content, said the manager of a Shandong-based mill that has received Rio Tinto's notice.

But PB fines prices may actually slide a little because part of the price gain on 11 January was the result of speculation over the impact of the fire on PB fines supply, which has now been cleared up, said the manager of a Hebei-based mill.

But most market participants expect PB fines prices to rise further in the near term as restocking on seaborne and portside markets continues.