Rio Tinto op­ti­mistic on China growth

In­fra­struc­ture is fun­da­men­tal to global growth ... China has shown the world what can be achieved.”

China Daily (Latin America Weekly) - - 13 Business - By ZHENG XIN zhengxin@chi­nadaily.com.cn

The na­tion’s ef­forts to re­duce over­ca­pac­ity in the steel in­dus­try will ben­e­fit global min­ing gi­ant Rio Tinto Group Plc and oth­ers, rather than hurt their busi­ness in­ter­ests, ac­cord­ing to its CEO Jean-Se­bastien Jac­ques.

The in­dus­try is un­der­go­ing re­struc­tur­ing in the coun­try but the re­duc­tion in ca­pac­ity does not mean a re­duc­tion in pro­duc­tion, he said.

High qual­ity raw ma­te­ri­als are still nec­es­sary as the move en­tails a shift to high qual­ity steel and shut­ting down of the smaller and more pol­lut­ing blast fur­naces while switch­ing to the new­est, largest blast fur­naces, he added.

China has been wit­ness­ing mas­sive over­ca­pac­ity in its iron and steel sec­tor and has vowed to re­duce ca­pac­ity. It plans to elim­i­nate 100 mil­ef­forts of Rio Tinto Group Plc CEO lion tons to 150 mil­lion tons of crude steel ca­pac­ity in the five years from 2016. In 2017 alone, the coun­try slashed its crude steel pro­duc­tion ca­pac­ity by more than 50 mil­lion tons, ex­ceed­ing its an­nual tar­get, as part of to im­prove the com­pet­i­tive­ness of the bloated sec­tor.

The coun­try also phased out the pro­duc­tion of 140 mil­lion tons of low-qual­ity steel made from scrap metal last year.

The in­dus­try’s prof­itabil­ity has sub­stan­tially im­proved, with ma­jor steel pro­duc­ers’ prof­its surg­ing 613.6 per­cent, ac­cord­ing to data from the China Iron and Steel As­so­ci­a­tion.

Ac­cord­ing to Jac­ques, Rio Tinto is well-po­si­tioned to pro­vide the right prod­uct with the right qual­ity to the right cus­tomers.

On the other hand, eye­ing the rapid de­vel­op­ment of elec­tric ve­hi­cles and bat­ter­ies, Rio Tinto said the com­pany would fo­cus more on met­als like cop­per and alu­minum.

“As China shifts from fast speed de­vel­op­ment to high qual­ity de­vel­op­ment, in­dus­tries like elec­tric cars will also drive up de­mand for cop­per and alu­minum, and we be­lieve such com­mod­ity de­mand will rise in the fu­ture as new en­ergy ve­hi­cles will be preva­lent on China’s streets in seven to 10 years. As a multi­na­tional cor­po­ra­tion, we aim to pro­vide high qual­ity prod­ucts to meet the de­mand,” he said.

Jac­ques, head of the world’s sec­ond-big­gest min­ing com­pany, said China has been the com­pany’s big­gest cus­tomer and Rio Tinto gen­er­ates more than 44 per­cent of its global rev­enue from the coun­try, sup­ply­ing lots of prod­ucts in­clud­ing cop­per and iron ore for steel, and baux­ite for alu­minum and di­a­monds.

Jac­ques said the min­ing group wel­comes the Belt and Road Ini­tia­tive, which would lead to in­fra­struc­ture im­prove­ments and drive up de­mand in­clud­ing cop­per and alu­minum, while pro­vid­ing a boost for com­pa­nies in re­lated sec­tors.

“In­fra­struc­ture is fun­da­men­tal to global growth,” he said adding that, “It un­der­pins com­mu­ni­ties and builds na­tions. China has shown the world what can be achieved.”

BLOOMBERG VIA GETTY IM­AGES

A met­al­lur­gi­cal en­gi­neer at Rio Tinto Group checks the pres­sure in a vat in­side the com­pany's plant in Mel­bourne, Australia.

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