Rio Tinto CEO says iron ore demand still strong in Asia

Rio Tinto CEO Sam Walsh says commodity markets must remain open as debate continues to rage over his company’s iron ore strategy.

Speaking in Seoul, Walsh said when the commodity cycle became tough, there was a temptation to turn inward.

“But we must keep our minds and our markets open,” Walsh said.

“There is a temptation to be parochial, to believe that artificial and temporary barriers will alleviate the pain of awkward transition — when to the ­contrary, being parochial may delay necessary change or amplify the response required.

“We can see such requests and pleas for new barriers, from some in government and some in business.”

While Walsh did not tie his comments directly to iron ore or the company’s Pilbara mines, they came at the same time FMG’s chairman Andrew Forrest had another go at Rio for its plans to ramp up production.

With iron ore prices down to around $US57 a tonne, major miners BHP and Vale announced revised plans to limit some production.

For BHP this means deferring growth in the Pilbara, while Brazilian miner Vale said it would pull 30 million tonnes of high-cost product out of the market.

However Rio is refusing to join the party and has drawn further criticism from Forrest.

“I am pleased, certainly, that Vale, too, have adopted specifically what Fortescue stands for and BHP also signalled that it would expand according to the market, not over the top of it,” Forrest told The Weekend Australian.

“Adopting a policy of expanding at any price or oversupplying the market in the medium term, which now only Rio is doing, is callous immaturity and debilitating to the Australian economy.”

Forrest accused the multi-national miner of putting Australian living standards at risk and said that the company was driving down prices by continuing to publicly talk up its expansion plans.

“I would like Australia to know when the sovereign credit rating is threatened, when standards of living do fall, when deficits grow, and surpluses are pushed further out, you can look at what has been pulled out of the Australian economy by this predatory volume behaviour attitude of the British-based Rio Tinto.

“It’s the damage done by the nauseatingly repetitive, hairy-chested statements that show complete disregard for the interests of their host nation — that they’re going to be the last man standing, that they’ll expand at any price.

“In London, you’re not going to feel that ill wind, you’ll just look at Australia like it’s a chess board — and not that it’s full of very real people with jobs, mortgages, homes and aspirations and the unnecessary unemployment and damage to business.”

However Walsh said despite iron ore’s falling price, growth out of Asia was still strong and supported Rio’s ramp up plans.

“Focusing myopically on monthly Chinese trade data as a proxy for global growth, or the daily machinations of the iron ore price on a trading screen, can mask so many things,” Walsh said.

“Iron ore will remain the backbone of Asia’s infrastructure needs and in copper the world will need another four to five million tonnes of new supply by 2025.”

Rio has always argued that it is the best interest of its shareholders and stakeholders that it continues to place its high quality tonnages into the market.

The company says limiting production would just force other mining houses to fill the void meaning Australia would lose out on taxes and royalties.

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