Daily Management Review

2.5% Rise in Steel Demand Expected Across China and the Rest of the World in the Next 15 Years: Rio Tinto


Rio Tinto PLC, one the world leaders in the production of many commodities including aluminium, iron ore, copper, uranium, coal, and diamonds, is optimistic about the near future of the steel industry and believes that despite a slowdown in China and a considerably lower iron ore prices compared to a year ago, steel demand across China and the rest of the world will grow at an average of 2.5% per year over the next 15 years.

On Thursday, the mining giant outlined the next phase of its plans to capitalise on the iron ore market "through a relentless focus on productivity and efficiency, technology, and people development" to drive down costs at its flagship Pilbara iron ore mine in Australia.

"This rigorous analysis confirms that Chinese crude steel production is expected to reach around 1.0 billion tonnes by 2030," said the FTSE 100-listed miner.

Iron ore is a key component in the production of steel, which is mainly used in construction.
Apart from China, the mining company also sees ample opportunities for growth in the other emerging markets and is of the opinion that the demand for steel from the non-Chinese countries would increase by 65% by 2030.

The global iron ore demand would rise to around 3.0 billion tonnes per year by 2030 driven by the demand for steel from the non-Chinese countries. Rio Tinto believes that despite the rise in demand, marginal iron ore producers shoving up around 120.0 million tones annually would leave the market with 45 .0 million tonnes "at risk" of exiting. This indicates that there would be lesser iron ore available in the global market by the end of 2015 and hence their products would be in demand.

“The company will save around USD200 million a year over the next three years through productivity gains at Pilbara,” Rio Tinto Technology and Innovation Chief Executive Greg Lilleyman said.  

"We have spent the past decade building the best iron ore business in the world - a project that has come in on time and below initial cost estimates. We intend to optimise these new assets to deliver maximum value for shareholders and stakeholders as markets transition," said the Group Chief Executive Andrew Harding.

Rio Tinto, a British-Australian multinatiotnal metal and mining company, has its headquarters in London, UK and a management office in Melbourne, Australia. The company produces commodities including aluminium, iron ore, copper, uranium, coal and diamonds. The company also is active in the refining segment especially those for bauxite and iron ore. Though its operations are mainly concentrated in Australia and Canada, the company has operations on six continents.

The company is listed both at the London Stock Exchange and the Australian Securities Exchange.

The company hopes to cash in on the expected increase in demand of steel as it has managed to lower the operating costs at the Pilbara mine, one of the largest iron ore mines in Australia, by almost USD1.0 billion per year since 2012.

The company has spent a total of USD14.70 billion in developing the Pilbara mine and the related infrastructure and the mine had a cash cost of USD16.20 per tonne of ore in the first half of 2015, compared to USD20.40 per tonne a year earlier.


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