The head of Rio Tinto, one of the world’s biggest mining companies, said he had no concerns about China’s economy, predicting restructuring of the country’s state-owned enterprises would lead to demand for the iron ore it produces in Australia.
Jean-Sébastien Jacques told the FT Commodities Global Summit in Lausanne that China’s crackdown on polluting steel furnaces would lead to greater demand for higher-quality raw material iron ore, a key ingredient in steelmaking. China’s state council has set out plans to eliminate 100m-150m tonnes of steel capacity as it tries to shift to a more consumption and services-oriented economic model.
Officials are planning a new crackdown on steel production in the key north-eastern city of Tangshan in an attempt to prevent false reporting of mill closures by local governments reluctant to obey shutdown orders, according to an official order seen by the FT this week.
The crackdown on polluting steel production will involve restructuring state-owned enterprises and supporting newer and larger steel blast furnaces, Mr Jacques said. “There is no doubt that the SOE 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 about $55 to more than $80 over the past year following a reduction in supply and because of strong demand for steel in construction and in China’s housing market. That helped boost Rio’s earnings to $5.1bn last year.
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