Rio Tinto has been forced to cut its full-year iron ore shipment guidance after its output slumped 14 per cent in the March quarter following a devastating fire in a screening facility at its Cape Lambert operations.

That, combined with cyclone damage at the same port and another fire earlier this month at a screening facility at its Dampier port operations, has prompted the mining giant to cut its expected forecast from the lower end of a guidance range of 338 million tonnes and 350 million tonnes to 333 million tonnes to 343 million tonnes.

Chief Executive Jean-Sebastien Jacques said the company’s iron ore business faced several challenged at the start of the year, particularly from tropical cyclones.

The company noted the fires and the cyclones would also affect output this quarter.

Pilbara shipments in the March quarter of 69.1 million tonnes were down 14 per cent on the previous corresponding period and a massive 21 per cent on the December quarter, although March quarter output is often lower because of the cyclone season.

The impact of the Cape Lambert fire was reflected in exports of the company’s Robe Valley lump and fines products which fell a massive 60 per cent on the previous corresponding period.

The screening facility at Cape Lambert, where the fire happened, is responsible for sorting the company’s Robe Valley lump and fines products and is essential for shipping the product.

Rio said any recovery of lost tonnes in the second quarter would remain subject to weather.

The company played down the impact of the second fire at its East Intercourse Island screen house on April 6 describing it as minor and noting that operations at the facility had restarted.

RBC Capital Markets Senior Resource Analyst Paul Hissey said lower iron ore shipments from Rio had been expected but today’s result pointed to the potential for additional downside for 2019. 

“Whilst softer Pilbara iron ore shipments in isolation should derive earnings downgrades, the iron ore division continues to generate significant cashflow with prices at current levels (about US$95 per tonne),” he said.

“We continue to flag downside risks to iron prices through 2019 and this predicates our underperform rating on Rio.”

Image: Rio Tinto staff at the port facilities on East Intercourse Island, The West Australian.