Miner Rio Tinto Group sees a host of near-term
economic challenges in China, including in the country’s real estate industry,
but reaffirmed its positive medium- and long-term outlook.
“It has been bumpy but
I think we need to remember that they have, in effect, come out of Covid a year
after us,” chairman Dominic Barton told Bloomberg
Television in an interview on Monday. He added: “There are
also challenges, as you mentioned. There is a big real estate issue.”
China’s recovery since Asia’s largest economy shed
Covid Zero curbs has disappointed, with continued weakness in the property
sector. Figures on Monday showed inflation eased to zero in June, while
factory-gate prices fell further, underlining continued weakness in demand.
That’s been a headwind for commodities including iron ore, a mainstay Rio
product and key profit driver.
Policymakers were
seeking a new balance, with a greater priority on high-quality growth, Barton
said. “They want to see more focus on the consumer, services, that type of
thing. But those are not easy to make happen.”
Iron ore fell 13% in
the second quarter, overturning gains seen in the first three months. Benchmark
futures in Singapore were 2.4% lower at $105.15 a ton at 12:01 p.m. in
Singapore, set for the lowest close in about a month.
Copper also dropped,
with three-month futures declining 0.5% to $8,328 a ton on the London Metal
Exchange.
“The question is you
can’t force consumers to buy — they’re going to buy when they’re confident,”
Barton said, adding that Chinese households were currently saving rather than
spending. “But there are enough of the fundamentals to feel good about the
prospects as they move forward.”
The Rio Tinto chairman
highlighted the need for continued urbanization in China as a source of
sustained iron ore demand, while also repeating his company’s plan to boost its
exposure to copper, lithium and nickel as consumption surges to meet the needs
of the global energy transition.
“We are so short of
copper as humans it’s not funny,” Barton said.
Mining.com