Rio, Anglo CEOs See China Resilience in Face of Euro Contraction
China’s economic growth will remain resilient to a contraction in Europe and underpin longer-term growth in demand for raw materials, according to the heads of Rio Tinto Group (RIO) and Anglo American Plc.
“For the next year, so as long as China is in this soft- landing mode we’ll be OK,” Tom Albanese, chief executive officer of London-based Rio Tinto, told Bloomberg Television’s Erik Schatzker on “Inside Track” today during the World Economic Forum’s annual meeting in Davos, Switzerland. “We’re looking at 8 percent plus growth in that market.”
China’s economy may grow 8.4 percent this year, compared with global expansion of 2.5 percent and a 0.3 percent contraction in the euro area, the World Bank said Jan. 18. China is the biggest user of everything from energy to copper to cotton and the largest customer for iron ore produced by Rio Tinto, the world’s third-largest mining company.
“I was just in China a couple of weeks ago,” Cynthia Carroll, chief executive officer of Anglo American Plc, told Maryam Nemazee on Bloomberg Television’s “Countdown” in Davos. “We think this year it will range between 8 and 9 percent and going forward, very, very similar sort of growth.”
The U.S. economy will grow 1.8 percent this year, while the euro-region will shrink 0.5 percent, the International Monetary Fund said Jan. 24 in an update of its World Economic Outlook. The IMF sees Chinese growth slowing to 8.2 percent this year and global growth of 3.3 percent. The euro-region will shrink 0.5 percent, it said.
U.S. Growth ‘OK’
“We’re looking at the U.S. slowly coming out of a tough spot, 2 percent growth that’s probably OK for us,” Rio’s Albanese said. “Europe, although it’s difficult for many, many economies, is probably less of an effect for us, as long as the ramifications of the euro would not have consequences outside of Europe.”
Rio, the second-largest exporter of iron ore, will post record full-year profit of $15.6 billion, according to the average estimate of 19 analysts compiled by Bloomberg. The company is due to report earnings Feb. 9.
“The steel outlook is very, very robust as well, off of the back of the economic development and transformational change in the emerging countries led by China,” said Carroll, who runs the world’s largest platinum producer. Still, the company expects softer prices for iron ore and metallurgical coal, the two key steel-making ingredients, in the first-half, she said.
Rio said in November it expects to increase capital spending 17 percent in 2012 and raised its iron ore expansion target to meet demand from China. It plans to invest at least $14 billion in developing projects this year, which may rise on further approvals, it said at the time.
“We’ve been saying through the course of 2011 that we would expect that China would avoid a hard landing, and that’s what I would think now,” Rio’s Albanese said. “Our order books are full, we’re selling everything that we can produce.”
To contact the reporters on this story: Jesse Riseborough in London at jriseborough@bloomberg.net; Carli Lourens in Johannesburg at clourens@bloomberg.net
To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net
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