Trade Risks, Costs to Test Mining Rebound, Cautions Rio Tinto
April 11 2018 - 8:29AM
Dow Jones News
By Rhiannon Hoyle
The chairman of Rio Tinto PLC, the world's second-largest listed
miner, said escalating trade tensions and rising costs threaten to
stall the mining sector's recovery.
"This year promises to be more challenging than the last, as the
industry faces rising cost inflation, as well as geopolitical
uncertainties, particularly in relation to trade," Simon Thompson
said in remarks prepared for a shareholder meeting in London.
Commodity producers fear being caught in the crossfire of a
U.S.-China trade conflict, which has already seen the U.S. put
steep new tariffs on some steel and aluminum imports.
Better global growth is helping miners emerge from a multiyear
downturn that prompted mass layoffs and hefty writedowns on
investments.
But the sector faces a fresh cost crunch as prices for things
including fuel, wages and chemicals begin to climb. The return of
inflationary pressures already sparked earnings misses for several
mining titans during the latest corporate-earnings season, damping
their stock-market rally.
Mr. Thompson said Wednesday that Rio Tinto was "well prepared"
and would continue to cut costs, improve productivity and pursue
new technologies to counter fresh headwinds.
"There is much work to be done" but Rio Tinto is "confident of
our performance in the year ahead," he said.
Rio Tinto in February reported a net profit of $8.76 billion for
2017, up 90% from a year earlier, as prices of coal, copper,
aluminum and iron ore rebounded.
Chief Executive Jean-Sébastien Jacques said the longer-run
outlook remains positive.
"While we see some emerging inflationary and input cost pressure
in the near term, as well as increasing volatility driven by trade
and protectionism, mid- to long-term global growth is solid," said
Mr. Jacques. "The world needs the metals and minerals we
provide."
He said the miner will, however, continue to sell unwanted
operations. Rio Tinto earned $2.7 billion from asset sales in 2017,
and has offloaded more assets worth nearly $5 billion so far this
year, including the recent sale of several Australian coal
mines.
"We will continue to exit any assets or projects that do not fit
our strategy," said Mr. Jacques.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
(END) Dow Jones Newswires
April 11, 2018 08:14 ET (12:14 GMT)
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