Rio remains "optimistic" over Chinese demand

RIO Tinto remains “cautiously optimistic” about where the coking coal and iron ore markets are heading, with Chinese steel demand expected to peak around 2030.
Rio remains "optimistic" over Chinese demand Rio remains "optimistic" over Chinese demand Rio remains "optimistic" over Chinese demand Rio remains "optimistic" over Chinese demand Rio remains "optimistic" over Chinese demand

The Blair Athol mine, image courtesy of Rio Tinto.

Alison Middleton

The producer’s managing director of Pilbara mines, Michael Gollschewski, said China’s steel growth still had a long way to run.

Giving the keynote address at the AusIMM Iron Ore 2013 conference in Perth yesterday morning, Gollschewski said robust Chinese steel demand was expected to peak at about one billion tonnes in 2030.

He noted that despite the past decade’s growth, China’s steel stock was well behind other economies.

Addressing hundreds of delegates at the Perth Convention and Exhibition Centre, Gollschewski said Rio saw China “peaking at around the 2030 mark”

“We are cautiously optimistic about where the market is heading,” he added.

“Where we see the market going hasn’t really changed. We believe the China story still has quite a way to run. We don’t see that situation significantly changing.

“The big impact will be the scrap market coming into play in China, and also the exit of high-cost producers as the supply and demand side comes more into balance.

“The important component is machinery, as the Chinese economy moves more from an investor infrastructure base to more consumer-driven economy and the machinery sector becomes an extremely important consumer of iron ore and steel.”

But despite the continued demand forecast, Gollschewski said there continued to be significant constraints to the development of new iron ore supply.

He also warned that announcements from other iron ore companies did not necessarily translate to supply capacity, flagging reduced sources of project financing and the protracted approvals process.

“The other significant aspect in our growth considerations is that announcements made at the market are seriously optimistic compared to what is actually delivered,” Gollschewski added.

Delegates also heard high-cost Chinese domestic supply required to meet demand in the short to medium-term was expected to reduce as the spot price volatility continued.

Returning to Rio’s operations, Gollschewski said the company had grown the business significantly “quarter on quarter, year on year”

He said 2012 had seen a full-year record Pilbara production of 239 million tonnes and a record production of 119.8Mt in the first half of 2013, despite cyclone disruptions.

Rio was constantly making operational improvements in the integrated mine, rail and port systems and low-spend, high-return initiatives were “business as usual”

Gollschewski emphasised Rio Tinto’s Mine of the Future program, and the use of technology, automation and remote operation centres.

“Right now we have 21 autonomous trucks running in the Pilbara, which will rapidly grow,” he said.

“Technology and automation are accelerants for improvements. What this technology allows us to do is tap into and accelerate unlocking the true potential of our people.

“The real value is that it allows us to improve in real time, creates enormous amounts of data and gives the operator line of sight across the business to help us optimise our business.”

Conference chair Ralph Holmes, of the CSIRO Minerals Down Under National Research Flagship, said the conference would be attended by 600 delegates, including 62 from overseas.

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