Rio warns on China, reviews asset sale timeline

By James Regan

SYDNEY (Reuters) - Global miner Rio Tinto (RIO.L) warned on Wednesday of slowing Chinese demand for commodities because of the global financial crisis, and signaled a possible delay in plans to sell $10 billion in assets.

Rio (RIO.AX), which had promised to sell non-core assets this year to pay back debt, also reported a 30 percent slide in July-September refined copper production.

Lower ore grades cut its share of copper production by 28 percent at the giant Escondida mine in Chile, a partnership with BHP Billiton Ltd/Plc (BHP.AX)(BLT.L).

Chief Executive Tom Albanese said the global financial crisis had not swayed his opposition to BHP's hostile all-share takeover offer for Rio, which the drop in share markets has halved in value to around $82 billion.

"We continue to be very comfortable with our position," Albanese told reporters on a conference call.

The warning over China is the first by a major raw materials supplier that the Chinese commodities boom is losing punch.

"In the near term, the Chinese economy is pausing for breath. China is not completely insulated from an OECD recession and we will see an impact on Chinese exports," Albanese said, adding any upturn in China's net demand would not occur before 2009.

Rio and other big mining houses have increasingly turned to China to sell millions of tonnes of metals and ores to feed rapid industrialization as more traditional markets softened. China accounted for 18 percent of Rio's sales last year.

Traders said Rio's comments helped push mining shares lower amid heightened gloom about a global recession. Rio's London shares tumbled 17 percent to 2,350 pence by 10:15 a.m. EDT, largely in line with the UK mining index .FTNMX1770.

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Rio has allocated billions of dollars in the last few years to expand its mines on the promise China would remain a ready buyer for years to come.

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"Quite clearly, Rio Tinto are now acknowledging with everyone else that any improvement in demand will be delayed," said FW Holst analyst Rob Craigie.

Albanese said suppliers with higher costs than Rio were the most at risk in the current environment, but Rio, too, was looking at the viability of maintaining higher cost operations, particularly in aluminum, which could lead to production cuts.

The chief executive of Rio's Alcan, Dick Evans, told Reuters the unit planned minor production cutbacks at two or three higher-cost smelters and was hunting for takeovers of firms hit by market turmoil.