Rio Tinto Sees Solid Demand for Iron Ore and Steel
September 03 2015 - 2:58AM
Dow Jones News
By Rhiannon Hoyle
SYDNEY-- Rio Tinto PLC told investors it expects world-wide
demand for iron ore to keep growing despite China's economic
slowdown, as the company projected a rising appetite for steel in
the years to come.
On Thursday, Rio Tinto forecast 2.5% average annual growth in
global steel demand for the next 15 years. Emerging-markets are
expected to take on an expanded role, with the miner predicting
non-Chinese steel demand will rise 65% by 2030.
While Chinese steel output has waned recently, Rio Tinto said it
remained confident in the country's steel market. It stuck with an
earlier projection that Chinese crude steel production will reach
about 1 billion metric tons by the end of next decade. China
produces roughly half the world's steel, and its annual production
is currently at about 800 million tons.
A global glut of steel and concerns over China's economic
prospects, have hurt prices for iron ore, the biggest ingredient in
steelmaking. Last month, BHP Billiton lowered its long-run forecast
for peak China steel demand to between 935 million and 985 million
tons, from 1 billion to 1.1 billion tons. "We have taken a
realistic view," Chief Executive Andrew Mackenzie said at the
time.
BHP is the world's third-largest exporter of iron ore, behind
Rio Tinto and Brazil's Vale SA, the top supplier.
Rio Tinto argues that although there is a steel glut now, China
will need more of the material in the future, as old homes are
demolished and replaced with buildings that are taller and more
steel intensive. The miner--which outlined its forecasts at a
Sydney investor presentation--said it also projects higher exports
of steel products and machinery from China to underpin that
country's output of the alloy.
Rio Tinto has been aggressively expanding its iron-ore
production in Australia's Pilbara mining region, drawing ire from
smaller rivals and politicians who say the miner and some of its
peers are hurting the industry by flooding the market.
The price of iron ore fell to a decade low in July of about $44
a ton, compared with a peak above $190 in 2011, and some analysts
think it will tumble to a fresh nadir as Australian shipments of
the commodity continue to rise. Goldman Sachs forecast prices to
fall a further 30% over the coming 18 months.
Rio Tinto said that despite "ongoing volatility in global
commodity markets," it expects "growing global demand for
high-quality iron ore." On Thursday, the miner forecast world
iron-ore demand to rise to 3 billion tons in 2030, an average 2%
annual rise between now and then.
Rio should produce roughly 335 million tons of ore from its
Pilbara operations next year, and roughly 350 million tons in 2017,
it said.
The miner also said it would ramp up its cost-cutting efforts
and expects to reduce maintenance costs by about $200 million a
year over the next three years.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
September 03, 2015 02:43 ET (06:43 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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