Rio Tinto has announced a record-breaking volume of iron ore shipments from its Pilbara operations in Western Australia during the December quarter, while simultaneously confirming a significant shift in its pricing strategy in response to pressure from China.
Record Shipments Amid Cyclone Recovery
The Anglo-Australian mining giant exported an impressive 91.3 million tonnes of iron ore in the final three months of 2025. This result marks a 7 per cent increase compared to the same period the previous year and represents a new quarterly record for the company.
For the full year, Rio Tinto managed to ship 326.2 million tonnes of iron ore. This achievement came after the company successfully clawed back 9 million tonnes of the 13 million tonnes of output lost earlier in the year due to disruptive cyclonic weather conditions in Western Australia.
The annual total comfortably fell within Rio's guidance range of 323 to 338 million tonnes, demonstrating the company's operational resilience and recovery capabilities following challenging weather events.
Pricing Shift to Chinese Index
In a significant development for global iron ore markets, Rio Tinto confirmed it has bowed to pressure from China to adopt a new pricing index overseen by China Mineral Resources Group (CMRG), the country's main iron ore buyer. This move away from the traditional London-based Platts pricing index could have substantial financial implications for the miner.
Rio Tinto's achieved average pricing in 2025 was $US82.8 per wet metric tonne on a free on board basis, equivalent to $US90 per dry metric tonne. This compares to the average price for the monthly average Platts index for 62 per cent iron fines converted to a free on board basis of $US92.5 per dry metric tonne.
The pricing shift places Rio Tinto in a similar position to BHP, which has been engaged in a tense stand-off with CMRG over the adoption of this same Chinese-controlled index. The change could potentially cost Rio Tinto billions of dollars annually in reduced revenue compared to previous pricing mechanisms.
Chinese Demand Concerns and Economic Context
Further pricing pressure may be on the horizon, with Rio Tinto suggesting that Chinese demand for iron ore appears to be softening. The company noted that while the Chinese economy continues to be driven by production and exports, investment and consumption moderated during the December quarter.
The property market in China remains particularly weak, and near-term stimulus measures appear modest beyond existing infrastructure support. These factors combine to create an uncertain demand outlook for iron ore in the world's largest consumer market.
Copper Performance and Glencore Pursuit
On a more positive note, Rio Tinto's copper business showed strong performance with quarterly shipments rising 5 per cent year-on-year. Annual copper production increased by 11 per cent, exceeding the top end of the company's increased guidance range.
Rio Tinto chief executive Simon Trott highlighted that record copper production continues following the delivery of the Oyu Tolgoi underground project, which he described as another demonstration of the company's unique and diverse project capabilities.
Boosting copper exposure remains a key driver of Rio Tinto's ongoing pursuit of Glencore. Under UK takeover rules, Rio has until February 5 to make a formal offer for the mining and commodities giant.
Coal Complications in Merger Discussions
A significant point of contention in the potential $300 billion merger discussions appears to be Glencore's substantial coal business. This presents a particular challenge for Rio Tinto, which exited the coal commodity in 2018 amid growing environmental concerns and shareholder pressure.
Industry speculation suggests that a combined Rio-Glencore entity could potentially spin off the coal division into a separate company to address these concerns. However, this approach raises its own set of complications and ethical questions.
Investor and Environmental Considerations
According to Simon Nicholas, an analyst at the Institute for Energy Economics and Financial Analysis, retaining Glencore's coal business would likely cause major headaches for Rio Tinto. Many of Rio's investors have policies that prevent them from investing in coal companies, particularly those with significant thermal coal exposure.
Despite Glencore's 2024 acquisition of metallurgical coal mines from Canadian miner Teck, its coal business remains dominated by thermal coal. Investors with environmental restrictions would probably want the coal business spun off either at the time of any merger or as soon as possible afterwards.
However, Nicholas cautioned that spinning out coal operations may not represent the most responsible path for Rio Tinto if the company wants to maintain its position as an environmentally-conscious miner. He noted that such a spin-off would do nothing to address global emissions and could potentially make them worse by creating a separate entity focused solely on coal production.
The dual developments of record iron ore shipments and the significant pricing policy shift highlight Rio Tinto's complex position in global commodities markets. The company must balance operational excellence with strategic relationships, particularly with China as its dominant customer, while navigating evolving investor expectations around environmental responsibility.
