Wednesday, May 26, 2010

Rio Tinto (NYSE:RTP) Sees Some Metal Demand Doubling in 15 Years

Rio Tinto (NYSE:RTP) CEO Tom Albanese commented at an annual meeting for the company that metals like aluminum, copper and iron ore will increase in demand by twice what they are today in the next 15 years.

Primary drivers of demand, according to Albanese, will be urbanization and industrialization. Those two trends obviously relate to emerging markets, especially China and India, which will continue to grow exponentially during that time, although probably at a couple percentage points down from their growth today.

Albanese also likes the energy sector, where coal and uranium will continue to be in high demand.

“These trends will require a significant response from producers,” Albanese said.

Rio Tinto is positioned strongly to be a major player in these important natural resources, with the major caveat being the macro-economic picture emerging and Europe and inflation in China. These could lower demand for raw materials, and the European sovereign debt crisis could drag us into an even worse recession than we're just starting to recover from.

Even so, it's not a matter of if these raw materials will increase in demand, but when. The 15-year estimate is a good one to me, as it takes into accounts the inevitable swing in demand that accompanies slow economic times, and even if things to get much worse for several years, ultimately they're recover, and mining companies like Rio Tinto should participate in the resultant rise in prices from the growing demand.

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