Rio Tinto: Chinese Commodity Demand Waning

Mining giant Rio Tinto Ltd. warned Wednesday that Chinese demand for steel making raw materials, copper and aluminum has slowed.

MELBOURNE, Australia (AP) -- Mining giant Rio Tinto Ltd., which is the focus of a $86 billion takeover proposal from rival BHP Billiton Ltd., warned Wednesday that Chinese demand for commodities is slowing.

The Melbourne-based global company also said in releasing its third-quarter operations review that global financial turmoil had forced it to reconsider its divestment strategy.

"The long-foreshadowed deceleration in economic activity has resulted in a marked reduction in Chinese commodity demand growth from the overheated levels we saw in 2007," Rio Tinto Chief Executive Tom Albanese said in a statement.

"In the near term, the Chinese economy is pausing for breath," he said. "China is not completely insulated from an OECD recession and we will see an impact on Chinese exports."

He said Chinese demand for steel making raw materials, copper and aluminum had slowed.

"Looking further out, Chinese GDP will remain largely driven by the domestic economy and we expect industrialization and urbanization to continue apace with strengthening demand across a range of Rio Tinto products," Albanese told reporters in a telephone conference.

Rio Tinto, which has set quarterly production records for iron ore, bauxite and hard coking coal in the latest quarter, said a plan to divest $10 billion in assets by the end of the year was under review given the "challenging financial markets."

The company is pursuing the divestment strategy to help pay off debt associated with the $38.1 billion acquisition of aluminium producer Alcan Inc.

Rio Tinto Chief financial officer Guy Elliott said Wednesday there were no concerns that the company would be able to service its Alcan debt, despite the likely deferral of divestments.

The company said the long-term outlook for the company was "positive" despite the upheavals in global markets.

"With our cost competitive assets, resilient margins and strong customer base, Rio Tinto is well placed to weather the current economic weakness," Albanese said.

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