Rio Tinto Expects Solid Demand for Iron Ore – by Rhiannon Hoyle (Wall Street Journal – September 3, 2015)

http://www.wsj.com/

Mining company stays confident in China’s steel market, despite country’s slowdown

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 coming years.

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 mining company predicting that 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 one billion metric tons by the end of next decade. China produces roughly half the world’s steel, and its annual production is currently at roughly 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 one 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.

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