Rio Sees Slower Chinese Copper Imports

LONDON, Oct. 14 -- Miner Rio Tinto (RIO.L: Quote) (RIO.AX: Quote) expects Chinese copper imports to slow in coming months and sees some downside risk to prices over the next 12 months, the head of the copper division said on Tuesday.

    "We expect Chinese imports to slow down in the rest of the year to 150,000-200,000 tonne range, monthly," Bret Clayton told Reuters in an interview.

    Imports to the world's top copper consumer soared to record highs above 300,000 tonnes a month in the second quarter but have fallen since then. August imports were at 219,731 tonnes, official data showed.

    But he was bullish about prices in the longer term due to expected supply problems, saying he would not be surprised to a see a record peak within two to five years.

    "If you pass 9-12 months our view is quite optimistic on the future outlook for metal," Clayton said, adding the supply constraints in the market would make it difficult to match demand. "If you look 2-5 years out we're pretty optimistic about how the industry looks," he said.

    The price of copper, used extensively in construction, has more than doubled since the start of the year, thanks to Chinese restocking and signs the global economy is improving. The metal hit a record high of $8,940 a tonne in July 2008.

    Clayton said there has been an element of sentiment-driven buying in the copper price rally, particularly in the last six months. "But I wouldn't say the price is totally disconnected (from supply and demand)," he said.

    Clayton said he expected demand from China to stabilise next year, after growing around 15-20 percent this year and he also estimated improved demand from OECD countries, which will keep the market in balance next year.

    "But there is a tendency of a small deficit in 2011," he said.

    RESUMING INVESTMENTS

    Earlier this year amid the economic downturn, the copper unit froze many of its growth projects, but now it is looking at resuming some investments.

    The first project to get the green light was a $60 million plan to extend the life of its Northparkes copper mine in Australia by about four to five years to 2016.

    Next in line for possible approval will be a $300 million plan to increase molybdenum production at its Utah operations by around 10 percent and improve the quality of the product to chemical grade so it will command a premium, Clayton added.

    In Mongolia, Rio is moving quickly to develop the massive Oyu Tolgoi copper-gold project, approved by Ulan Bator last week.

    Oyu Tolgoi, a venture with Canadian partner Ivanhoe Mines (IVN.TO: Quote), will cost about $5 billion to bring both the open pit and underground areas to full production, with average annual output of 450,000 tonnes of copper and 330,000 ounces of gold.

    The project, due to launch production in 2013, is one of the world's biggest untapped copper and gold deposits.

    Among Rio's other big new copper projects, the next likely to be developed is La Granja in Peru, but complex geology means that finalising it will probably take longer than expected.

    The Peruvian government recently amended the development agreement, extending the date for finalising the project until 2016, Clayton said. La Granja has an inferred resource of 2.7 billion tonnes of metal.

    Clayton also said that he supported the London Metal Exchange's forthcoming molybdenum contracts, due to be launched in February next year, saying Rio welcomed more transparent pricing. Molybdenum is obtained mostly as a byproduct of copper.

    "We're very comfortable with LME type pricing for copper and if that's how molybdenum price evolves, opens the ability for poeple to invest in molybdenum, we're happy with that," he said.

    (Source: Reuters)