copper, page-3

re: copper, heading for 3 bucks, wiza INTERVIEW: Rio Tinto Most Upbeat Yet On China's Growth


By Matt Chambers
Of DOW JONES NEWSWIRES

MELBOURNE (Dow Jones)--Global miner Rio Tinto PLC (RTP) has given its most upbeat assessment yet of China's ability to drive higher commodities demand, adding Japan is re-emerging as a consumer and that the main risk to global growth is the U.S.

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Rio Tinto said Friday it is more confident Chinese economic growth can be sustained, after recent revisions to Chinese data showed the country's service sector is bigger than was previously thought.

"I think we're pretty buoyant on China, we don't have many doubts." Chief Financial Officer Guy Elliot told Dow Jones Newswires, adding growth statistics had added to Rio Tinto's and its customers' confidence.

"We can see very clearly in our order books that the confidence remains," Elliot said.

Rio Tinto has a reputation for conservative forecasts and its comments on China contrast with those made in March last year that Chinese growth and continued growth in Asia as a whole were uncertain.

China's rapid expansion has fueled record earnings by Rio Tinto and rivals such as BHP Billiton (BHP) by pushing commodities demand and prices higher. Rio Tinto said Thursday it increased its profit 58% to US$5.22 billion as Chinese steel demand and the country's 9.9% economic growth helped treble the miner's iron ore earnings.

Major iron producers Rio Tinto, BHP and Brazil's CVRD (RIO) are currently locked in negotiations with steel makers, trying to increase a 71.5% price hike they secured for the current Japanese fiscal year.

Signs of increasing Chinese and Japanese demand for iron ore, which is used to make steel, have led most analysts to forecast further gains of between 10% and 20% for the fiscal year starting April 1.

China's economy grew 9.9% last year and fears which emerged early in 2005 that growth was set to crash have largely disappeared.

Rio Chairman Paul Skinner Thursday told investors he was encouraged by China's 11th five-year plan, which includes a number of infrastructure projects.

"Having listened last week to one of the Chinese vice-premiers giving us a preview of the new five-year plan for China, it was one of the most convincing planning presentations I've seen in a government or corporate context for quite some time," Skinner said.

Banking on further growth, Rio Tinto increased its proportion of sales to China to 15% from 10% in 2005 and plans to boost this further.

The miner said the biggest risk to global growth is likely to come from reduced housing demand and prices in the U.S. in the second-half of this year, which may cut U.S. resources demand.

"We see more risk being in the United States than we see elsewhere, with the big imbalances its carrying in its economy," Skinner said.

The main risks to China's growth are the massive influx of people to the cities from rural areas and wealth disparity, which may put strain on the economy, CFO Elliot said.

Boosting Asia's commodities demand will also be Indian growth and the continued resurgence of Japan, the continent's biggest economy, Rio Tinto said.

Rio Tinto is forecasting growth of 8.5% from China this year, up to 8% from India and 2.5% from Japan.

"We're seeing some very encouraging signs in Japan and to some degree I don't think that's rippled through to people's senses to the degree I'm hearing from business leaders in Japan," Chief Executive Leigh Clifford said at the investor conference.

Rio Tinto said there is good potential for rapid economic growth in India "especially in an environment that promotes increasing reform and openness."

"Strong metals and minerals demand should accompany such increasing growth, albeit from a low base," Rio Tinto said in a statement. Over the longer term Indian economic growth is expected to be an important catalyst for metals and minerals demand.

-By Matt Chambers, Dow Jones Newswires;
61-3-9614-2662; [email protected]
-Edited by Paul Dekkers
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