Big Miners Need a Better Plan for Growth Riddle in China – by David Stringer (Bloomberg News – September 13, 2016)

Rio Tinto Group, the world’s second-biggest miner, is no longer certain of picking the path ahead for growth in China, its biggest customer. It isn’t alone.

China’s short-term demand remains difficult to read, Glencore Plc’s Chief Executive Officer Ivan Glasenberg said last month after the largest miners were wrong-footed this year by Chinese stimulus that’s boosted raw materials demand, lifting prices following five straight annual declines. Rio now sees long-term targets as unhelpful, and has drafted a range of potential growth scenarios, with titles including “China Malaise” and “Fits and Starts,” according to CEO Jean-Sebastien Jacques.

“It’s not about predicting the future, it’s about preparing for any future — this is where mining and metals companies have gone wrong in the past,” EY’s Global Mining and Metals Sector Leader Miguel Zweig said in an e-mailed response to questions. “Growth in China, which is critical to pricing, is difficult to anticipate.”

The muddied outlook means Rio, which won about 42 percent of first-half revenue from China, has backed away from its forecast that the nation’s steel output will rise through 2030 to peak at about one billion tons.

BHP Billiton Ltd.’s top economist said this month iron ore exporters have been caught out by higher prices, while Glencore last month booked a $395 million loss after hedging future coal production before a rally amid a surge in Chinese imports.

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