Rio's Iron Ore Unit Faces Further Industrial Action

By Angela Macdonald-Smith

Oct. 11 (Bloomberg) -- Rio Tinto Group, the world's third- largest mining company, faces the prospect of further industrial action by train drivers at its iron ore operations in Western Australia after the first strike today in more than 16 years.

Today's 12-hour strike, in which 11 out of 12 drivers took part, was ``only the commencement of the campaign,'' Gary Wood, secretary of the Western Australian division of the Construction, Forestry, Mining & Energy Union, said today. Deliveries from Rio's mines weren't affected today by the strike, said Gervase Greene, a spokesman for the company's iron ore unit.

Rio produces ore from 11 mines in Western Australia that are serviced by a mainline rail network of 1,300 kilometers (800 miles) of track, according to the company's Web site. The strike, which was called after Rio refused to negotiate a collective agreement on salaries, will cause disruptions, the iron ore unit's Chief Executive Sam Walsh said in an internal memorandum seen by Bloomberg News on Oct. 9.

``This could be a sign of things to come,'' said Mark Pervan, senior commodity strategist at Australia & New Zealand Banking Group Ltd. ``It could be, with market conditions starting to turn southward, that this could be more of a recurring theme, that the unions are looking to maybe try to somehow bolster their position in what could be quite difficult operating conditions.''


Rio and rival BHP Billiton Ltd., the world's second- and third-largest iron ore suppliers, face a 10 percent sales drop this year because Chinese steel mills are cutting output, Melbourne-based Pervan said yesterday in an e-mailed note.

`Pressure on Rio'

``There's no doubt there will be further action, it's just in what form it is,'' Wood said in a telephone interview. ``Today was just the initial introduction to it, then we'll assess what occurred and put in place the next stage of the protected action, putting pressure on Rio to come to the table.''

The union believes there were some delays to rail deliveries as a result of the strike, said Wood, who is based in Perth.

``There was no disruption as such,'' Greene said by telephone from Perth. ``Some people were on strike. No trains were delayed, they ran on a normal schedule.''

The company employs 315 train drivers in the Pilbara region of northwestern Australia.

Iron ore accounted for 29.6 percent of Rio's revenue last year. The company produced 145 million metric tons of iron ore and it wants to triple output to 600 million tons with expansions in Australia, Guinea and Brazil.

Collective Agreement

The company's trains are operated by a single driver and have about 230 ore cars, each able to carry 100 tons to Rio's two export ports. A fully loaded train weighs about 29,500 metric tons and is about 2.4 kilometers in length. Rio owns 86 locomotives in the Pilbara area.

Union mineworkers at rival BHP Billiton voted for a new three-year collective agreement, according to a bulletin posted on the union's Web site dated Sept. 25. Workers at BHP's Yandi iron ore mine are seeking talks on new agreements, the Australian Workers Union said yesterday.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net; Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net