Rio Tinto Doesn't See Any Iron Ore Demand Slowdown on China's Power Cut

Rio Tinto Group, the world’s second-biggest exporter of iron ore, hasn’t seen any demand slowdown after China cut power supplies to some steelmakers to meet energy efficiency targets.

“We haven’t seen any drop in our forward shipping schedule for the rest of this year,” Warwick Smith, managing director of sales and marketing for Rio’s iron ore business, told reporters at a conference in Dalian. “We’re running at full capacity.”

The Chinese government limited power to steelmakers this month, trimming supply in the world’s biggest producer, as it rushed to meet energy consumption targets. The nation’s demand for iron ore, used in steelmaking, rose to a record 628 million metric tons last year.

Imports by China will remain at similar levels to last year, if not better, Smith said.

Vale SA, Rio Tinto and BHP Billiton Ltd., the three biggest exporters of iron ore, this year abandoned a 40-year custom of setting prices annually in favor of quarterly contracts. Prices have gained in two out of three quarters this year with the new system.

“Our position for this fiscal year has been to give the quarterly pricing mechanism the chance to operate,” Smith said. “We’ll continue to talk with all our customers in Japan, Korea and China about what they think, what they see should evolve.”

Rio Tinto doesn’t have any plans to price iron ore on a monthly basis, he said.

Mining companies and steelmakers should seek a better pricing system, Shan Shanghua, general secretary of the China Iron and Steel Association, said at the same conference. Pricing the ore based on indexes doesn’t accurately reflect the Chinese market, he said.

Shan reiterated a call to limit the number of Chinese importers for iron ore at the conference.

--Helen Yuan. Editors: Tan Hwee Ann, Andrew Hobbs.

To contact the editor responsible for this story: Andrew Hobbs in Sydney at ahobbs@bloomberg.net.

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