Rio Tinto expects price swings ahead in markets

SYDNEY: Rio Tinto Group, the world’s third-largest mining company, expects further volatility in metal prices as markets weigh global economic prospects for next year.

“We should expect more of these gyrations of all of our prices as we move forward to 2012,” Tom Albanese, chief executive officer of the London-based company, said on Sunday on the Australian Broadcasting Corp’s “Inside Business” programme.

“The markets are trying to react and anticipate to what they think the economy is going to look like next year.”

Commodities are set for a “difficult environment” in 2012, according to UBS, citing a possible dissolution of the European Union and a “hard landing” in China, the biggest raw-materials consumer.

The worsening debt crisis in Europe has prompted a slump in equities and commodities, including iron ore and copper prices, and cuts to global growth forecasts.

“I don’t think this volatility is going to go away,” Albanese said. The company will have to run a business with large capital projects in an “environment, which is realistically going to have higher levels of volatility than we would have assumed a couple of years ago,” he said.

Rio has dropped 25% this year in London trading, cutting the company’s market value to 67 billion pounds ($105 billion). The benchmark FTSE 100 index has lost 5.9% in the same period.

Metal prices in London have slumped 17% this half, while iron ore prices have rebounded after tumbling 31% in October to below $120 a tonne, the biggest loss since at least 2008. Aslowing global economy and stronger dollar will limit potential for gains by commodities next year, Morgan Stanley said last month.

Rio last week said it expects to increase capital spending 17% next year and raised its iron ore expansion target, bolstered by the company’s confidence in long-term demand