By Simon Johanson
Mining giant Rio Tinto says steel production in China has reached a saturation point and growth in demand for iron ore, one of Australia’s largest revenue earners and exports, will now come from India and other countries in Asia.
“Globally, I think China has reached a saturation point in terms of its steel production,” Rio’s chief executive Jakob Stausholm said. “I think we will see steel production in China going slightly down in the course of this decade. It might be flat or it might be a little bit lower.”
Rio Tinto chief executive Jakob Stausholm has the miner focused on producing “future-facing” minerals such as copper and nickel.Credit: Bloomberg
China’s faltering economic recovery and troubles in its property market are intensifying concerns about demand for iron ore, steel-making’s raw material from which Australia’s major miners Rio, BHP and Fortescue Metals Group earned record prices for cargoes in 2021.
China’s market would remain stable and exports were still at historically high levels, Stausholm told a Melbourne Mining Club forum on Tuesday, following comments last week when he insisted that Rio, because of its lower operating costs, was in a stronger position than others to ride out any falls in commodity prices from weakening demand in China.
Growth will come from India or South Asia. “Over time it’s bound to happen,” he said.
The mining boss, who travels regularly to China and visits steel producers, said Chinese steelmakers were looking at developing mills in Indonesia or the Middle East.
Rio is joining forces with Codelco, the world’s largest producer of copper.Credit: Bloomberg
Under Stausholm’s stewardship, Rio is firmly on a path to diversify its mineral base and dig up and produce “future-facing” elements such as copper and nickel, which are increasingly sought after to accelerate the clean energy transition.
Stausholm said he had avoided making big acquisitions to boost the company’s portfolio, but was focused on smaller acquisitions or joint ventures that would “actually shape the portfolio in a helpful way”.
Rio said on Tuesday it has teamed up with the world’s largest copper producer to explore a major new tenement in Chile’s remote Atacama region as it races to meet soaring demand for a mineral that will help power the globe’s transition to renewable energy.
The mining giant will acquire Pan American Silver’s 58 per cent operating stake in Chile’s Agua de la Falda prospect for $US45 million ($67.5 million). The company will also purchase another nearby concession, Meridian Property, for $US550,000.
Both transactions are on the basis of Rio providing new smelter royalties.
The remaining 42 per cent of Agua de la Falda is controlled by state-owned Codelco, the world’s largest producer of copper – a key ingredient in the wind turbines, transmission lines and electric cars that will help arrest global warming and enable the world to reach its net-zero emissions goals.
“Copper is critical for the global energy transition, which is at the heart of Rio Tinto’s strategy, and Chile is one of the most important sources of world supply as demand for copper in renewables and electrification grows,” Stausholm said.
Rio bet last month that the world’s appetite for recycled aluminium will expand rapidly, teeing up a deal to buy half of the Canadian metal-recycling business Metalco from the Ontario-based Giampaolo Group for $US700 million.
Stausholm said the latest partnership with Codelco was “essential to find better ways to provide materials the world needs”.
Codelco chairman Maximo Pacheco said it will provide a chance to leverage both companies’ experience, strengths and capabilities. “By joining forces, we can enhance our exploration and development efforts for a highly promising asset,” Pacheco said.
Rio and Codelco previously signed an underground mining collaboration agreement late last year aimed at encouraging innovation and technology to improve safety, productivity and environmental, social and governance outcomes.
Agua de la Falda has previously been explored for precious metals, with minimal modern exploration for copper. Analysis by Rio’s exploration unit indicates it is a good prospect for new copper discoveries, which will now be the focus of the joint venture.
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