Rio Tinto sees customers turning cautious

Sun Nov 27, 2011 5:33pm EST
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By Sonali Paul and James Regan

MELBOURNE/SYDNEY (Reuters) - Global miner Rio Tinto (RIO.AX: Quote) (RIO.L: Quote) warned on Monday that further cracks could be emerging in global commodities markets as the economies of Europe and the U.S. waver, with its customers increasingly cautious on the outlook.

Still, the world's second largest miner of iron ore and a large producer of copper, coal, aluminum and other industrial staples, said it was able to sell all the commodities it could produce.

The company's comments matched rival BHP Billiton (BHP.AX: Quote)(BLT.L: Quote), which earlier this month turned slightly more bearish on commodities demand, warning that some buyers were facing tighter access to credit. [ID:nL3E7MH03D]

In a statement ahead of an investor briefing, Rio Chief Executive Tom Albanese said continuing stresses in the euro zone and a weaker outlook for the U.S. economy were affecting customer sentiment, which had become more negative in recent months.

"For the near term I am concerned about the general softening of prices when we continue to see cost escalation and strong currencies in Australia and Canada," Albanese said.

"But while there are signs of nervousness, we believe the impact of current economic concerns on our business is manageable, unless financial markets substantially deteriorate," he said.

At the same time, Rio said it had approved $14 billion for projects in 2012 and said that could increase.

It also said it was raising its iron ore expansion target by 20 million tons to 353 million tons a year by the first half of 2015.   Continued...