Iron ore, a key ingredient in steelmaking, is Australia’s most lucrative commodity, bringing in $133 billion to the nation’s overall export earnings in the past financial year. Robust demand from China pushed benchmark iron ore prices to a record high of $US230 a tonne last year. However, iron ore prices have cooled on the back of China’s zero-tolerance approach to COVID-19, which has dampened China’s economy.

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Pandemic-related disruptions to construction activity have curtailed China’s steel production and consumption, a key market for Rio’s ore, with demand falling about 9 per cent over the year to August, versus the same period in 2021. Despite that, Rio said its portside sales of iron ore in China are increasing. Portside iron ore cargoes are usually delivered within days of payment compared to seaborne cargoes that typically have a lead time of 30-60 days from the time of booking to arrival.

With commodity prices trending downwards during the quarter, Rio Tinto chief executive Jakob Stausholm warned on Tuesday that demand was likely to taper further as the global economy cools. The mining giant added that global consumer confidence is waning, and aggressive interest rate hikes are increasing the risks of a recession in the US and Europe.

Shipments of iron ore out of the Pilbara were 4 per cent higher than the previous quarter despite unplanned rail outages on the Yandicoogina mine line and major derailment on Gudai-Darri’s line.

In another key deal, the miner said it has entered a $2 billion joint venture with China Baowu Steel Group Co. to develop the Western Range ore deposit with an annual capacity of 25 million tonnes. Construction will begin in early 2023 and first production is anticipated in 2025.

Stausholm said the company is delivering on its decarbonisation strategy. “Last week we announced a partnership with the government of Canada to invest up to C$737 million over eight years to decarbonise our Rio Tinto Fer et Titane operations in Québec, and to position the business as a centre of excellence for critical minerals processing,” he said.

The market for lithium, a key ingredient of electric vehicle batteries, is seeing strong growth as EV producers roll out new models and take market share from internal combustion vehicles. Lithium carbonate prices remain elevated as a result, Rio said.

The miner is progressing early works for a camp and airfield at its Rincón lithium project in Argentina and is negotiation with local communities in Serbia around its Jadar lithium-borate project.