'Big growth agenda' for Rio Tinto

By Qian Yanfeng (China Daily)
Updated: 2010-10-22 07:58
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Mining firm's Chinese procurement moves underscore country's key role

SHANGHAI - Anglo-Australian miner Rio Tinto Plc said on Thursday that its procurement for project equipment and raw materials in China this year will reach $400 million, underscoring the increasingly important role of the country as an importer of its iron ore and major supplier for its worldwide operations.

The $400-million procurement package covers a broad range of categories including steel fabrication, ship loaders, ore cars and electrical equipment.

"(While) we recognize China's role as a major customer, we also see a big growth agenda (as) a purchaser of Chinese goods and services We have big expectations (on that) going forward," said Scott Singer, global head of procurement for Rio Tinto.

Procurement for Chinese goods and services has been growing steadily for the miner since it established a procurement office in Shanghai in 2003 that has made transactions worth $1 billion, Singer said. The company has so cooperated with 130 Chinese suppliers, he said.

Although the amount is still a fraction of Rio's annual worldwide procurement spending of $12 billion, the company said it is committed to "long-term growth" in China.

"We've made concerted efforts from the corporate side of the business to increase the amounts of goods and services we buy in China. We recognize the value and quality of the goods we procure here and will steadily increase our efforts to buy more each year," said Bret Clayton, group executive for business support and operation.

China accounts for one- fourth of Rio Tinto's global revenue, which surged to nearly $11 billion in 2009 from $400 million in 2000.

Tom Albanese, chief executive officer of Rio Tinto, said two months ago that most Chinese steel mills had accepted the quarterly pricing mechanism in iron ore price negotiations after the world's top three iron miners abandoned the annual benchmark system in March.

The miner on Thursday also dismissed the view that Rio purchases in China for its cost-effectiveness.

"The capability and capacity of the manufacturing base in China has brought huge value to Rio's global business. We see cost advantage, but we are also very impressed with the engineering capabilities in China in terms of design and innovation," Singer said.

China Daily