Global miner Rio Tinto expects 2009 to be a rough year in terms of both prices and volumes for key commodities, the firms chief economist said on March 04. Vivek Tulpule, speaking to Reuters on the sidelines of a conference, said a pickup was possible in 2010, though people should not be blind to the risk of a prolonged slowdown.
Rio Tintos major commodities are iron ore, aluminium and copper. "2009 will be a very rough year for both prices and volumes and probably also for construction. A lot of people I talk to in the mining industry are suffering a crisis of confidence, they are putting a lot of projects on hold," said Tulpule.
"Our view is that it will be a slow year or two". Copper, zinc, nickel and other industrial staples have lost 50 percent or more in value since last years collapse in commodities markets.
For iron ore, analysts predict benchmark prices could contract by as much as 60 percent this year due to sharp drops in orders from steel mills. Tulpule said benefits flowing from Chinas giant economic stimulus package, largely directed at infrastructure, were likely to show up midway through the year.
"It will take to time to offset the negative impact of a downturn in exports and construction, those areas have slowed very fast," said Tulpule. He said the collapse in commodities flowed from two "crunches": the global credit crunch and a crunch in China that had been induced by its attempts to slow the economy last year because of concerns it was overheating.
"The effect that had was way beyond their own expectations and certainly beyond the expectations of anyone else," Tupule said.
"That deceleration had a profound effect on our markets as when growth decelerates inventories build up, and when youve got lots of inventory you suddenly decide not to build things and then you dont need to buy half as much copper and aluminium and iron ore."