RIO's take on the potential impact of a US recession on resources demand :
RIO Tinto boss Tom Albanese has issued a fresh rallying call to the market ahead of a likely takeover bid from rival BHP Billiton, saying Chinese mineral demand was set to be resilient in the face of fears over slowing developed world economies and a possible recession in US.
Rio Tinto boss Tom Albanese says Asia's material demand will drive growth, even if the US slips into recession.
Mr Albanese said the outlook for mineral demand remained strong, while financial markets were fixated on the ongoing fallout from the sub-prime crisis, the run on British bank Northern Rock and the potential forthe US economy to slide into recession.
He said even if the US went into recession, it would probably only shave one percentage point off Chinese GDP growth, which he added was otherwise expected to be about 10 per cent.
"The macro conditions are continuing to lead to strong markets in China and Asia," he said.
Mr Albanese unexpectedly dropped in at a dinner Rio's iron ore management team had with visiting journalists in Perth on Tuesday night, and reiterated that he saw no value in BHP's informal three-for-one offer, and that the strong independent value outlook for Rio was unchanged by the global financial ructions.
And he said the British market remained wary of BHP's takeover strategy, concerned that it might not be able to deliver significantly higher value from what would be the biggest merger in mining, if not corporate, history.
Britain is expected to be the key battleground in any takeover fight, given that the London market accounts for 78 per cent of Rio's total capitalisation.
While conceding that a merger with BHP would achieve synergies, he said these were small compared with the value offered by Rio's independent growth outlook, and that he was not prepared to pursue merger synergies at the expense of shareholder value.
The UK Takeover Panel has given BHP until February 6 to either launch a bid for Rio or walk away for at least six months.
Mr Albanese noted that despite the concerns over the US and European economies, there had been no easing in the strong iron ore market in Asia.
Rio's head of iron ore sales and marketing, Ian Bauert, said the market was the hottest he had seen in his 30 years with the company, and that Asian steel mills were not expecting the US slowdown to affect them.
"Customers are saying that it isn't going to have an impact on them," Mr Bauert said.
Mr Bauert said Chinese steel production was being driven more and more by rising domestic demand within China, rather than the pace of exports that the Government was taking steps to slow.
Mr Albanese said the danger of Chinese growth stalling in some post-2008 Beijing Olympics hangover had receded, with the scale of the country's industrialisation now having a "national momentum" beyond just a few key cities.