December 22, 2008 / 3:31 AM / 11 years ago

Rio idles Australian pig iron plant as market falls

SYDNEY, Dec 22 (Reuters) - Global miner Rio Tinto (RIO.AX) (RIO.L) has suspended operations at an Australian pig-iron plant for at least three months, the latest attempt by one of the world’s top mining houses to weather the economic downturn.

Rio Tinto said it was idling the plant in the hope the market for iron would recover. All roughly 150 workers at the Hismelt joint venture plant, near Perth in west Australia, would be put on leave with full pay over the three months, a spokesman added.

“In this market, it is not profitable to operate the plant, so we will assess things again in three months,” he said, adding the market for pig iron had dropped to unprofitable levels from a “colossal” selling price of around $1,000 a tonne just two months ago.

“The price has since fallen to the point where it costs more to produce than we can get for it,” he said.

The move coincides with a shutdown of all of Rio’s iron ore mines in Australia’s Pilbara region 2,000 kilometres to the north 1,200 miles) for two weeks in the face of declining demand from steel mills. [ID:nSYD223356]

Each of Rio’s 11 mines as well as its rail network spanning hundreds of kilometres across the the world’s richest iron ore deposit will be placed on care and maintenance for two weeks starting Dec. 22 in order to reduce iron ore output around 10 percent to 170-175 million tones by year end.

The Hismelt plant, 60 percent owned by Rio, 25 percent by Nucor Corp (NUE.N), 10 percent Mitsubishi Corp <8058.T and 5 percent China’s Shougang steel group 000959.SZ, last year produced just over 100,000 tonnes of pig iron for export last year, according to the spokesman.

The plant employs a process where iron-containing materials and non-coking coals are injected directly into a molten iron bath to produce a high quality iron product.

Rio and its partners have long touted the process as a potential replacement for the traditional blast furnace method of iron making, though the operation has yet to come close to producing at a design rate of 800,000 tonnes per year.

The main buyers are so-called steel making “mini-mills” such as ones operated by Nucor, that rely on non-ore type feed, such as pig iron and scrap metal.

Rio, shouldering heavy debt after buying Canadian aluminium group last year, has already announced it will cut 14,000 jobs from its global workforce, slash capital spending by more than half next year and sell more assets [ID:nSP365347] (Reporting by James Regan; Editing by Ben Tan)

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