Rio Tinto weighing macro-economic concerns as it reviews Canadian projects

MONTREAL - Aluminum demand has been picking up but weakness in the global economy continues to weigh heavily on Rio Tinto's plans for several costly development projects in Canada, the head of the mining giant's aluminum business suggested Wednesday.

"What makes us cautious is the macro-economics," Rio Tinto Alcan CEO Jacynthe Cote told reporters.

"Are we totally out of the recession, will the economy continue growing moderately in 2011 and will we still have significant inventory of aluminum in the world."Rio plans to invest up to US$6 billion on various projects in Quebec as it begins to reopen the purse strings for several global development projects.

Work on the Kitimat smelter upgrade and other development projects was slowed in 2009 because of the global recession, which depressed aluminum demand and prices.

Aluminum prices have rebounded, rising to about US$2,300 per tonne this fall as demand has exceeded forecasts earlier this year. But they remain below pre-crisis levels and will remain so until aluminum inventories decrease, Cote added.

While she wouldn't indicate which way the company was leaning as it prepares its spending budgets for next year, Cote said she's "fairly relaxed" because the company continues to invest hundreds of millions in three projects in Quebec and British Columbia.

Among them is a pilot plant for its AP50 technology, which will improve productivity by 40 per cent. The company broke ground on the Saguenay, Que., facility a few months ago and has received approval to spent $429 million.

It is also building a new high-efficiency, 225 megawatt turbine that will increase energy capacity at its Shipshaw power station. The $250-million project is slated to be completed by the fourth quarter of 2012.

Rio is spending $578 million preparing its smelter in Kitimat, B.C., for an upgrade using Rio Tinto Alcan's proprietary AP technology.

Earlier, Cote told business leaders that developing countries are primarily responsible for a "palpable" improvement in global demand being experienced by the aluminum industry amid an economic recovery.

"It is real, but it's still fragile and uneven," she told the Montreal Council on Foreign Relations.