Rio Tinto sees iron ore prices retreating slightly

LONDON Thu Feb 14, 2013 11:54am EST

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LONDON Feb 14 (Reuters) - Rio Tinto expects iron ore prices to retreat only slightly this year from current high levels as fewer projects than expected come on stream, the chief executive of the world's no.3 miner said on Thursday.

Benchmark 62-percent grade iron ore hit 15-month highs last month of almost $160 per tonne, almost double from a trough it hit last September. They are down only 2 percent from that high.

"I expect that prices will come off a bit but still be robust," Rio Tinto's new chief executive, Sam Walsh, told journalists at a news conference after the company reported its full-year earnings.

"I think it would be very bullish to expect that the prices will remain where they are through the full year," added Walsh, the group's former iron ore boss.

A plunge in iron ore prices to three-year lows below $87 in September marked a turning point for the raw material, which is a big money-spinner for producers such as Rio, Vale and BHP Billiton .

The low was followed by an aggressive restocking drive by Chinese steel mills, which lifted the price to its highest since October 2011. Supplies are still tight, which should keep prices high in the first half.

While a range of projects is due to come on stream this year, some are likely to be constrained by logistical, labour and financial difficulties, Walsh said.

"Not as many projects will come on as people have predicted," he said. "These projects are hard and they are sizeable investments, and some people are finding it harder to arrange loan funding."

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