China Metal Demand Slowing But Seen Strong in Coming Yrs-Rio

Metals consumption in China is slowing at the moment but there are still reasons to expect growth in the coming years , said Rio Tinto (RTP) forecasting executive Neal Brewster Wednesday.

Speaking at the GFMS Ltd. seminar in London, Brewster said while China's growth is linked to the rest of the world, gross domestic product growth is still forecast at 9%, and global metals demand will resume when global GDP growth stops decelerating.

Furthermore low-cost supply will be lower than expected this year, and new entrants have higher costs, he said.

Engineering, procurement and construction management markets are also tight, and look like they are getting tighter, Brewster added. The lead time for new equipment is longer, he said.

Brewster forecasts underlying metals demand growth to persist, and demand for many commodities to double in the next 15 years.

Metal production costs are up again this year, and given the forecast decoupling of metals from the dollar, base metals prices should stabilize, Brewster said, adding there is limited downside due to higher costs in the longer term, Brewster said.

Metal prices have fallen sharply since July, when the dollar ended its downtrend and oil prices began to slide due to a deterioration in global economic growth prospects.

On Wednesday at 1358 GMT, three-month copper for delivery in three months was trading at $6,900 a metric ton, down 24% since its record high on July 2 this year. Other metals have made similar falls, with aluminum down 22% and zinc down 12% during the same period.

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