Rio Says China’s Steel Demand Shows Recovery Signs

By Stephanie Wong

May 8 (Bloomberg) -- Rio Tinto Group, the world’s third- largest mining company, said China’s steel and iron ore demand is recovering because of the nation’s 4 trillion yuan ($586 billion) stimulus spending.

Monthly steel production has exceeded 40 million metric tons for both March and April, Anthony Loo, managing director of the company’s China unit, said today in Shanghai. That’s helping to drive imports of iron ore, he said.

Rio, BHP Billiton Ltd. and other iron ore producers are betting that a revival in Chinese steel demand would bolster prices for their products. Crude steel output gained 1.4 percent in the first quarter from a year ago, China’s Ministry of Industry and Information Technology said last month.

“It’s still too early to see the effect in the longer term,” Loo said. “We hope the demand will be sustainable.”

China’s steel prices are heading for the third straight week of gains on signs of demand recovery in the automobile industry. China is spending 4 trillion yuan ($586 billion) on a stimulus packing to reach an economic growth target of 8 percent this year.

Hunan Valin Iron & Steel Group, the Chinese steelmaker which bought 17.3 percent of Fortescue Metals Group ltd., said today there’s a “low-level” recovery in steel demand.

Domestic prices of hot-rolled coil, an industry benchmark, have gained 3.6 percent to 3,491 yuan a ton as of yesterday from 3,369 yuan on April 17, according to the Beijing Antaike Information Development Co.

Rio Tinto is still in talks with Baosteel Group Corp., the nation’s biggest mill, to agree on benchmark iron ore prices for the year started April 1, Loo said. He didn’t give details.

Iron ore is used to make steel.

To contact the reporter on this story: Stephanie Wong in Shanghai at swong139@bloomberg.net