By Anthony DiPaola
Nov. 10 (Bloomberg) -- Rio Tinto Group, the world's second- biggest aluminum producer, is reviewing plans to build a smelter in Saudi Arabia and may delay the project by as much as a year.
``We're taking a step back to see how to optimize the project,'' Dick Evans, chief executive officer of Rio's Alcan unit, said in an interview at a conference in Dubai today. Rio and its partner, state-owned mining company Ma'aden, may find ``significant savings'' in the $11 billion budget, he said.
The world's largest producers of aluminum, iron ore and steel are cutting output and reviewing investment plans as the global economy slows and commodity prices decline. United Co. Rusal, the world's largest aluminum smelter, said last month that 75 percent of companies making the metal in China, Europe and the U.S. were unprofitable after the price plunged.
Costs for the Saudi project climbed from an initial estimate of $7 billion as raw-material and energy prices increased. London-based Rio sees an opportunity to cut building expenses now that commodity prices have dropped, Evans said.
Aluminum for delivery in three months fell 1.8 percent, to $1,995 a ton on the London Metal Exchange as of 9:41 a.m. local time. It has fallen 41 percent since trading at a record $3,380 a ton on July 11.
Rio also said today it will cut iron ore output from its mines in Western Australia by 10 percent in response to falling demand. Slowing economies have slashed steel demand, damped prices and made mills unprofitable in China, the biggest producer of the metal. Brazil's Cia. Vale do Rio Doce, the biggest producer of iron ore, began output cuts last month and doesn't expect a market recovery until next year.
Rio Tinto rose 402 pence, or 15 percent, to 3,020 pence as of 9:34 a.m. in London trading. The Bloomberg Europe Metals & Mining Index, which includes Rio and 13 other companies, increased 13 percent.
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