Rio Tinto plc (ADR)(NYSE:RIO), international miner has cut its growth forecast for China saying that it was making efforts to cut costs having already slashed $500 million. It has experienced an uncertain international outlook.
Rio Tinto is the second largest iron ore miner in the world, having over 80% of its earnings in 2012 predicted to come from the material, is immensely dependant on Chinese steel stipulate picking up and is relying on Chinese infrastructure spending plans to impel the demand.
Tom Albanese, CEO of Rio Tinto said on Tuesday that important stimulus efforts have been declared in the US, Europe and China. However, it is uncertain exactly when the effect of these will be on the markets. Considering the uncertainty and the considerable fluctuations in prices in recent times, the company seems to be more cautious on the outlook over the upcoming quarters.
Rio Tinto has cut its forecast for Chinese economic growth to just below 8% from 8% initially, at par with the International Monetary Fund’s amended forecast on Tuesday. Rio stated that economic growth in China is healthy but moderating and is slow and bumpy in developed economies.
Costs of iron ore plunged 42% from a high in April to a three year low of $87 a metric ton previous month. While they have come around to $110, costs are still below a perceived floor at $120, the level at which high cost Chinese producers would lose money.
As per estimation of Rio, around 100 million metric tons of Chinese iron ore production had become unprofitable. Rio said that it sees signs of curtailment of a large proportion of the production.
The comments came ahead of a briefing on the firm’s copper business that has a brighter near term stance. However, it has flagged its most recent project, the enormous Oyu Tolgoi copper and gold mine in Mongolia, as the one that may be deferred due to prolonged discussions with China over power supply to the mine.