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Rio goes to China for growth
LONDON (CNN) -- China's growing demand for raw materials is the only bright spot on the horizon for global miner Rio Tinto, its chairman Robert Wilson said Thursday. Wilson said China's industrial production was of growing importance to mineral producers, particularly in iron ore and copper. But he warned that the company's overall business outlook was clouded by the consequences of the war in Iraq, and said that the caution outlined by Rio Tinto last year had proved well founded. He also savaged what he said was the refusal by EU members and other western countries to open their markets to developing countries, saying this threatened global trade liberalization. Big diversified miners such as Rio Tinto and rivals BHP Billiton and AngloAmerican have had to contend with weak global growth in 2002, particularly in key markets such as the United States, Europe and Japan. In January Rio Tinto posted an 8 percent fall in net profits to $1.53 billion for 2002 -- a result that was still the second highest on record. Wilson said most of Rio Tinto's markets in 2002 were "depressingly flat", apart from iron ore and gold. "I hesitate to forecast when we will see a major improvement in overall demand and prices. Other than for iron ore, it will probably not be this year," he said in an address to shareholders at Rio Tinto's annual general meeting in London. Wilson said that even leaving aside the Iraq war, it was hard to see what might stimulate the main OECD economies in the short term. "Further progress towards global trade liberalization may also be at risk," he warned. "This is partly a reaction to weak economic conditions but is also a consequence of the refusal by western countries, notably in the European Union, to open their markets to fair competition in agriculture from the developing world." Wilson said China's rapid growth was a threat to many sectors of industry. Its increasing use of modern technology, combined with very low labor costs, was establishing a competitive advantage for the Asian giant. But he said China, which on Thursday reported first-quarter growth of 9.9 percent year-on-year, lacked the raw materials to support its industry. "Comparative advantage in the production of many of these requirements therefore lies outside China, with suppliers such as Rio Tinto," Wilson said. Wilson steps down as Rio Tinto chairman at the end of October and will be replaced by board member Paul Skinner, who is retiring as a group managing director at Royal Dutch/Shell in September.
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