Rio Tinto warns of more falls in commodities

GLOBAL MINER Rio Tinto warned yesterday that further cracks may be emerging in global commodities markets as the economies of Europe and the US waver, with its customers increasingly cautious on the outlook.

Prices of iron ore, copper and aluminium – among Rio’s biggest income earners – have tumbled by more than 20 per cent each since August as stockpiles of unused metal swell in warehouses from Rotterdam to New Orleans to Shanghai.

Rio chief executive Tom Albanese said ongoing stresses in the euro zone and a weaker outlook for the US economy were affecting customer sentiment, which had become more negative in recent months.

“For the near term I am concerned about the general softening of prices when we continue to see cost escalation and strong currencies in Australia and Canada,” Mr Albanese said in a briefing for investors.

Rio’s comments broadly matched rival BHP Billiton, which earlier this month turned more bearish on commodities demand, warning that some buyers were facing tighter access to credit.

Mr Albanese later told reporters Rio was yet to feel the full brunt of the European crisis, though he voiced concern Europe’s plight would inevitably touch China, Rio’s biggest buyer.

“It’s a tough market out there right now,” Mr Albanese said, adding that the “jobless recovery” in the United States was also posing a threat to global operations.

Still, the world’s second largest miner of iron ore, and a large producer of copper, coal, aluminium and other industrial staples, is selling all the material it can produce, he said.

Analysts expect Rio to make a net profit of around $16 billion this year.

Separately, BHP Chief Executive Marius Kloppers yesterday cautioned steel production growth had stalled in China, where both companies sell the lion’s share of their iron ore.

“When we talk to our Chinese customers, there is not a sentiment that the operating rate in the steel industry will improve or change dramatically over the next little while,” Mr Kloppers said. – (Reuters)