Rio Tinto CEO Confident China Can Fix Property Crisis Amid Muted Inflation
27 Julio 2022 - 07:20AM
Noticias Dow Jones
By Rhiannon Hoyle
The chief executive of mining group Rio Tinto struck an
optimistic tone on the outlook for China, the world's largest
commodity buyer, despite recent turmoil in the country's important
property market.
Problems in China's housing sector have recently knocked down
prices for iron ore, one of the world's most-traded
commodities.
But Rio Tinto Chief Executive Jakob Stausholm on Wednesday said
subdued inflation in China means policymakers there can focus more
on reviving the economy, including the country's troubled property
market. Consumer prices rose at a 2.5% annual pace in June, well
behind the blistering gains reported in Europe and the U.S.
"They're not fighting inflation the same way as the Western
world are right now," said Mr. Stausholm. "They have more means to
fix their economy, and that includes sorting out challenges they
have faced recently in the property market."
Iron ore's fortunes are entwined with early cycle property
activity in China. The sector accounts for almost a third of steel
and iron-ore demand in the country, which dominates those commodity
markets.
Goldman Sachs on Monday cut its price forecasts for iron ore as
it predicted the market would swing to a significant surplus in the
second half of the year.
Property is the most challenged and least policy-supported area
of China's economy today, the U.S. bank's analysts said in a
note.
Goldman Sachs forecast a 67 million metric ton surplus in the
iron-ore market in the second half of 2022, wider than an earlier
34 million ton estimate and swinging from a 56 million ton deficit
in the first half of the year. The analysts now expect an average
price of $85 a ton in the six months through December, down from a
previous forecast of $100 a ton.
Spot iron ore on Tuesday traded at roughly $112 a ton, down from
more than $140 a ton as recently as May, according to S&P
Global Commodity Insights.
Rio Tinto Wednesday reported a 28% fall in first-half net
profit, underpinned by weaker iron-ore prices versus the
year-earlier period when the commodity traded at record highs on
strong Chinese demand.
Pressure has been building in China's housing market since
authorities put in place rules to prevent excessive borrowing by
the country's developers.
For Rio Tinto, the world's largest iron-ore producer, China is
its biggest source of revenue. "The property market is a very, very
important part of the Chinese economy-probably more so than for
many Western economies," said Mr. Stausholm.
He cautioned there could still be short-term challenges in
China, especially because of Covid-19 restrictions.
He also highlighted the potential recession risks in the West
amid surging inflation, which he said would also clearly impact the
miner which has large operations in Australia as well as the U.S.
and Canada. "The short term remains truly unpredictable," he
said.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
(END) Dow Jones Newswires
July 27, 2022 08:05 ET (12:05 GMT)
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