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PrintThe move from Rio, the world's second largest iron ore producer, mirrors a decision last month by the world's largest iron ore producer, Brazil's Vale, to reduce output by 30 million tonnes a year in response to softening demand.
Rio Tinto chief executive Tom Albanese said the reduction was to align production with revised customer delivery requirements in light of the fourth quarter drop in Chinese demand.
"We believe this will be a short, sharp slowdown in China, with demand rebounding over the course of 2009, as the fundamentals of Chinese economic growth remain sound," Mr Albanese said in a statement.
Rio Tinto will cut iron ore production from its Pilbara mines in Western Australia by ten per cent per year and has revised its iron ore shipments for 2008 to between 170 million tonnes and 175 million tonnes.
Steel companies worldwide have initiated a significant cut to production amid the global financial crisis leading to a weakening demand for iron ore, a key steel-making ingredient.
Mount Gibson Iron Ltd has been forced to sell its iron ore at a significant discount and will cut a third of its workforce after some of its customers defaulted on binding offtake agreements last month.
"I think you'll definitely see BHP come out with some news. They'll have to now," DJ Carmichael analyst James Wilson told AAP.
"There is an oversupply (of iron ore) in the Asian ports at the moment and there are no surprises these guys are cutting production."
BHP Billiton Ltd, the world's third largest iron ore producer, said there was no plans to cut output at this stage, however.
"We have no plans to cut production," BHP Billiton spokesman Peter Ogden told AAP.
The company is expected to produce about 137 million tonnes of iron ore from its Pilbara operations this financial year, up from 122 million tonnes in the previous corresponding period.
A spokesperson for Fortescue Metals Group Ltd, Australia's third largest iron ore producer, said there was no intention to cut production at this stage.
Rio Tinto shares had gained $5.15, or 7.13 per cent to $77.42 by 1109 AEDT, BHP Billiton put on $1.77, or 6.34 per cent to $29.70, Fortescue Metals added eleven cents to $2.71, while Mt Gibson added two cents, or 5.26 per cent, to 40 cents.
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