The reliance of Rio Tinto’s iron ore business on China’s economy is hammered home in its 2021 production numbers. But 2022 will bring a new set of challenges.
Chinese President Xi Jinping’s call for governments and central banks to keep stimulating the global economyAs one of the world’s biggest iron ore exporters, and a company that counts a Chinese state-owned enterprise as its largest shareholder, Rio’s fortunes have long been tied to the fate of the world’s second largest economy. The miner’s production report for 2021 hammers this home.
China’s stimulatory efforts have helped iron ore prices rebound from as low as $US90 a tonne in November to around $US124. Rio’s internal view is that Chinese steel consumption will remain robust across 2022 as Xi looks to drive economic growth, but the big price gyrations of 2021 - which saw prices shoot as high as $US230 a tonne in the middle of last year - look less likely.
The high-quality deposit could eventually produce as much as 200 million tonnes of iron ore each year, and thus is seen by China - which essentially controls half the deposit through state-owned enterprises - as a way to wean itself of Australian ore.Rio, which owns the other half of the deposit, is closely watching the development of the Chinese half by a consortium of Chinese and Singaporean groups.
This modest growth ambition is no surprise given the extraordinary challenges iron ore boss Simon Trott continues to face.