Rio Tinto Group, the world’s top iron ore producer, reported a drop in shipments in the year’s first quarter on delays to expansion projects, but signalled volumes should rise in the second half.

Total shipments from its iron ore operations in Western Australia’s Pilbara region were 71.5 million tonnes in the three months ended March 31, the company said in a statement on Wednesday, down 15 per cent on the previous quarter and 8 per cent lower from the year-before period. That compares with a median forecast of 73.1 million tonnes from five analysts.

The results come even as Rio is among commodity giants which have had a stellar year of profits, driven by soaring prices. Raw materials could rally further should investors boost their allocation at a time of rising inflation, according to JPMorgan Chase. Iron ore futures in Singapore surged 32 per cent in the first quarter amid rising demand expectations despite China’s campaign to tame prices.

“Production in the first quarter was challenging as expected, re-emphasising a need to lift our operational performance,” Jakob Stausholm, Rio’s chief executive officer, said in a statement. As the company starts to ramp up its Gudai-Darri project in WA, “our iron ore business will have greater production capacity and be better placed to produce additional tons of Pilbara Blend in the second half,” he said.

Depletion of existing mines was not offset by replacement projects because of delays in commissioning, while labour issues caused by pandemic constraints also contributed to the challenges at Pilbara operations, the company said.

Rio isn’t the only iron ore giant to announce first-quarter production that missed estimates. Brazil’s Vale identified weather disruptions as a key reason for delivering output that was down from both the previous quarter and the year-ago period. The Brazilian company churned out 63.9 million metric tonnes in the first three months of the year, missing the 67.8 million-tonne average estimate among nine analysts tracked by Bloomberg,

Maintaining forecasts

Rio maintained its forecasts for iron ore exports of 320 million to 335 million tonnes in 2022, after shipping 322 million tonnes last year. The consumption outlook is clouded with concerns over economic growth as China grapples with a resurgence of COVID-19. Meanwhile, the industry also faces risks of further government intervention amid mounting inflation pressure.

“Recent input cost increases are the largest raw material cost hike since the Oil Crisis in 1973,” London-based Rio said in its statement.