Rio Tinto chief cautious about aluminium industry restructuring in China

During the FT Commodities Global Summit in Lausanne, Jean-Sébastien Jacques, CEO of Rio Tinto said that China’s crackdown on polluting steel furnaces would lead to greater demand for higher-quality raw material iron ore. The restructuring of the country’s state-owned enterprises would lead to demand for the iron ore it produces in Australia. He at the same time added that the same is not true for the aluminium industry restructuring.

Mr Jacques, who took charge as the chief executive of the Anglo-Australian mining giant in 2016, had a more cautious approach on aluminium.  China’s restructuring of the aluminium industry will take longer. Aluminium industry has been highly subsidized and supported by the government in order to create employment. The fear of potential loss of jobs in remote areas that house the smelters and refineries will slow down the restructuring pace for the aluminium industry and China will continue to produce aluminium. He sees no immediate spur in demand of aluminium from other countries.

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“I would be very cautious about the pace of restructuring” in aluminium, Mr Jacques concluded. 

China’s aluminium production increased by 23 per cent in January and February 2017 compared with a year earlier, according to Goldman Sachs. China’s state council has set out plans to eliminate more than 30% of alumina and aluminium capacity in 28 cities as it tries to fight pollution issues and shift to a more consumption based economy.