The head of Rio Tinto, one of the world’s biggest mining companies, said he had no concerns about China’s economy in the year ahead, predicting restructuring of the country’s state-owned enterprises would lead to demand for higher-quality commodities.
Jean-Sebastien Jacques said he had “no doubt” China would meet its economic targets this year ahead of the Communist Party’s congress in the autumn. He told the FT Commodities Global Summit in Lausanne he is not concerned about the underlying demand in the country’s economy, write Henry Sanderson and Neil Hume .
China’s crack down on polluting steel furnaces will lead to greater demand for higher-quality iron ore, Mr Jacques said.
“There is no doubt that the state-owned enterprises restructuring will happen and it can be an opportunity,” Mr Jacques said. “If you can supply the right quality of iron ore then clearly you have a role to play.”
Iron ore prices have rallied from around $55 to over $80 over the past year following a reduction in supply and due to strong growth in China’s housing market. In February prices spiked to over $90. That helped boost Rio’s earnings to $5.1bn last year.
Still, Mr Jacques said it was difficult to determine whether more Chinese domestic output of iron ore would come into production due to higher prices. “The real question is whether they restart some of this capacity. It’s very difficult to read this situation,” he said.
On aluminium Mr Jacques said China’s restructuring of the industry will take longer because of the loss of jobs in remote areas. China’s aluminium production rose by 23 per cent in January and February compared to a year earlier, according to Goldman Sachs.
“I would be very cautious about the pace of restructuring,” in aluminium, he said.
Mr Jacques declined to comment on regulatory investigations into payments to a French consultant who helped Rio secure rights to a massive iron ore deposit in Guinea. “Our job is to make sure wherever we operate we do the right thing,” he said.
Mr Jacques said the purchase of its thermal coal assets in Australia by Chinese-controlled mining company Yancoal for $2.45bn, is underway. The deal was discussed at a meeting with the head of China’s State-Owned Assets Supervision and Administration Commission this month, who indicated the financing is in progress, he said.