Rio Tinto to expand metals trading beyond own output

Rio Tinto (ASX, NYSE, LSE: RIO) plans to expand its metals trading business into third-party material and derivatives as chief executive Simon Trott seeks to squeeze more value from the world’s second-largest miner.

The initiative, Bloomberg reported, would mark a shift for Rio Tinto, which has historically focused on marketing its own production and operates a much smaller trading business than Glencore (LSE: GLEN).

Glencore’s extensive trading network was one attraction during unsuccessful takeover talks between the companies over the past two years.

Rio Tinto does not intend to replicate standalone commodity trading houses, but is considering a significant expansion of its existing commercial business under chief commercial officer Bold Baatar, according to Bloomberg.

The push could give Rio greater flexibility to profit from regional supply imbalances and spare capacity across its global operations while broadening a commercial business that remains modest compared with major commodity traders.

Trading opportunities

Rio Tinto is considering more third-party trading in markets where its existing assets could provide an advantage. That includes alumina, where the company has surpluses in some regions and shortages in others.

In North America, its Kennecott operations have spare copper smelting capacity, creating opportunities to handle additional material. Rio Tinto could also trade copper cathode and related products such as sulphuric acid.

The commercial team currently has about 20 traders and could add several more as the company expands the operation.

The strategy fits with Trott’s broader overhaul of Rio Tinto since he became CEO last year. He has laid out plans to simplify the company, sell assets, cut costs and improve returns.

Rio Tinto is also in talks with Dutch multinational Vitol Group over a potential freight and logistics joint venture, another move that could reshape how the miner handles its global supply chain.