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Rio Tinto Says Aluminum Markets To Recover But Still Cautious On Short Term
Jun 23,2010 11:17CST
industry news

MELBOURNE, June 23 -- Rio Tinto Ltd. (RTP) said Wednesday it believes aluminum markets are set to continue to recover thanks to strong long-term fundamentals but the company remains cautious on the short-term outlook.

Rio Tinto Alcan Chief Financial Officer Phillip Strachan said prices were set to be driven higher by factors including the appreciation of the yuan, rising electricity costs in China, raw materials prices and the high capital costs of installing new capacity.

"Continued cost pressure on marginal cost producers will provide upward price lift," he said in a slide from a presentation delivered to analysts on a site visit in Queensland state.

Rio Tinto Alcan expects strong aluminum demand recovery in 2010, with Chinese demand forecast to be between 18% and 20% higher than in 2009 and global demand to be up about 15%.

Longer term, the group's base case assumption is for global aluminum demand to grow by between 4% and 5% a year over the next two decades.

Strachan said the alumina market remains finely balanced and that China continues to drive the market, with its demand for the product forecast to rise 22% in 2010 to 37 million metric tons.

Bauxite prices were trending higher driven by Chinese alumina refinery restarts, and bauxite volumes into China were expected to recover to pre-crisis levels in 2010, he said.

Rio Tinto Alcan was trending well in 2010 in terms of its key profit drivers, Strachan said, and the unit was continuing to deliver cost improvements which would deliver stronger margins and returns.


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