LAUNCESTON, Australia, Nov 28 (Reuters) – Almost unnoticed, Rio Tinto Chief Executive Jean Sebastien Jacques has ushered the China iron ore elephant out of the room.
News that Rio has quietly abandoned its long-held view that China’s steel output will rise to 1 billion tonnes a year by 2030 wasn’t exactly hidden by Jacques, but neither was it highlighted when the new boss of the world’s second-largest mining company held an investor briefing last week.
What gathered much more attention on the negative side was the scandal over $10.5 million in payments to an adviser on the ill-fated Simandou iron ore project in Guinea, which has claimed the jobs of two senior executives.
On the plus side of the ledger was Jacques’ commitment to boost free cash flow by $5 billion over the next five years, and the stronger outlook for the short-term given the strong recent price performance of iron ore and coal.
But there can be little doubt that the major news from Rio last week was the long overdue backing away from the view that China’s steel production was heading significantly higher over the medium to long term.
Former Rio CEO Sam Walsh, who was replaced by Jacques in July, had refused to back away from the 1 billion tonne a year forecast, even in the face of mounting evidence that it was becoming extremely unlikely.
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