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(Bloomberg) — Miner Rio Tinto Group sees a host of near-term economic challenges in China, including in the country’s real estate industry, but reaffirmed its positive outlook for the medium and long term.
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“It’s been bumpy but I think we need to remember that they are, in fact, coming out of Covid a year after us,” Chairman Dominic Barton told Bloomberg Television in an interview Monday. He added, “As you mentioned, there are challenges. There is a big real estate problem.”
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China’s recovery since Asia’s largest economy scrapped Covid Zero restrictions is disappointing, with continued weakness in the real estate sector. Monday’s figures showed inflation fell to zero in June, while factory gate prices fell further, underscoring continued weakness in demand. This has been a headwind for commodities including iron ore, which is one of Rio’s primary products and a major profit driver.
Barton said policymakers are seeking a new equilibrium, with greater priority placed on high-quality growth. “They want to see more consumer focus, services, that sort of thing. But it’s not easy to achieve.”
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Iron ore fell 13% in the second quarter, reversing the gains seen in the first three months. Singapore benchmark futures were down 2.4% at $105.15 a tonne at 12:01 pm in Singapore, hitting the lowest close in about a month.
Copper was also lower, with three-month futures down 0.5% at $8,328 a tonne on the London Metal Exchange.
“The question is, you can’t force consumers to buy — they will buy when they’re confident,” Barton said, adding that Chinese households are currently saving rather than spending. “But there are enough basics to feel good about prospects as you move forward.”
Chairman Rio Tinto highlighted the need for continued urbanization in China as a source of sustainable demand for iron ore, while also reiterating his company’s plan to boost its exposure to copper, lithium and nickel while increasing consumption to meet the needs of the global energy transition.
“We’re as deficient in copper as humans, it’s not funny,” Barton said.
— with assistance from Kathleen Hayes.
