Rio’s Walsh Has Hope of ‘V-Shape’ Recovery in China
Rio Tinto Group, the world’s third- largest mining company, is hopeful of a “V-shape” economic recovery in China, boosting demand for iron ore as price talks with steel mills build toward settlement.
“What is unshakeable is our belief that China and India and the other emerging economies will be the key engines of any return to world growth and commodity demand growth,” Sam Walsh chief executive of the London-based company’s iron ore unit, its biggest earning division, said today at a conference in Canberra.
Rio sees “green shoots” of recovery in iron ore demand in China, the world’s biggest buyer, and expects annual price talks to end sooner than later, Walsh said. China will be able to meet its 8 percent growth rate target this year, Zhang Junsai, the nation’s ambassador to Australia, said today, backing Rio’s proposed investment deal with Aluminum Corp. of China.
“China buying is now setting a floor for bulk commodities prices,” Goldman Sachs JBWere Pty analysts led by Melbourne- based Malcolm Southwood said in a report. “Economic sentiment, demand for raw materials and commodities prices will be better in 12 months’ time and 24 months’ time, than they are now.”
Rio, battling shareholder and political opposition to the proposed $19.5 billion investment from Aluminum Corp., known as Chinalco, was little changed at A$64.01 at 12:33 p.m. Sydney time on the Australian stock exchange.
‘Worst Over’
The “worst is over” in demand for raw materials and prices for base metals may have bottomed, Goldman Sachs JBWere said in the report yesterday. There are early signs China’s 4 trillion-yuan ($586 billion) stimulus is boosting that nation’s economy, Australia’s Treasurer Wayne Swan earlier told the Minerals Week 2009 conference payday loans.
“We are ready to expand again” when there is a sustained recovery in metals demand, Walsh said at the conference. “Signs of improvement are present in recent data from China and such improvements continue the traditional recovery in exports and housing.”
Rio said this month it remains committed to the proposed Chinalco deal. The company has agreed to sell $7.2 billion of convertible bonds and stakes in projects worth $12.3 billion to Chinalco.
“Chinese investment in Australia is a win-win situation for the companies,” Zhang told reporters. “I understand the Australian government also welcomes Chinese investment and they will treat Chinese investment as they treat other international investments. That is the assurance we have been given by the Australian government.”
Australia Talks
Rio chairman Jan du Plessis arrives in Australia this week to hold talks with shareholders and government officials on the accord, Walsh told reporters. He held talks last week with investors in London.
“Once we have heard all those views we will determine the course of action in relation to the Chinaclo strategic alliance,” Walsh said. “It’s a situation that is evolving, and as has been made mention, we certainly have seen economic conditions improve since the deal was announced in February.”
Swan, who will make the final decision on the Chinalco proposal after an inquiry by the investment regulator, said today he won’t comment on the deal. “I never speculate about decisions that are before me as the minister for administering the Foreign Investment Review Board and the act we have,” Swan told reporters in Canberra.