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Indian steel production could take off like China'sand
India is seen by both Rio and its predator, BHP Billiton, as havingpotential for commodity demand growth of the kind delivered byChina this decade as it spurred a global commodities boom. Rioexpects India, which currently exports about 80 million tonnes ofiron ore a year to China, to eventually become an importer of bothiron ore and steel some time after 2012.
Ian Bauert, the company's managing director of iron ore sales andmarketing, said signs of that were already emerging. "We'regetting interest from Indian steel mills who are saying they wouldlike to try it (Rio's iron ore) for their plants," Mr Bauertsaid in an interview with The Australian in Perth.
Mr Bauert said Indian steel production could take off like China'sand, while there were still reforms needed, many mills were alreadybeing planned near the coast, which would give them easier accessto seaborne iron ore.
Iron ore growth is key in BHP's $US150 billion bid to create aglobal mining giant and Rio's more easily expanded Pilbara portsare a major factor when the target says BHP needs to further boostits 3.4-for-1 scrip bid.
Despite market concerns about a global slowdown and reports ofgrowing Chinese stockpiles, Rio and BHP have remained confidentthere will be little reduction in longer-term demand growth fortheir iron ore.
Mr Bauert said there was thought to be about 68 million tonnes ofiron ore, or about a month's supply, stockpiled at Chinese portsafter as much as 3 million tonnes of steel production a month wasstopped for the Olympics.
Production is expected to pick up again after the national holidaysat the start of October.
As well as faith in China's continued demand, Mr Bauert pointed tolocal supply risks, with almost half the 840 million tonnes ofimport quality equivalent iron ore used by China each year produceddomestically.
Body: Much of this is by high-cost private operations that need toheavily concentrate their grades and for which Mr Bauert said Riosaw little future.
To put the size of Chinese production in perspective, Australia,which is forecast to be the world's biggest iron ore exporter thisyear, is expected to deliver 328 million tonnes of iron ore in2008, less than China as a whole.
Building on last year's successful introduction of a "Pilbarablend", which reduced its products sold from a potential 13 tofive, Rio Tinto is planning a global blend for its eventual 600million tonne a year production ambitions.
The blend would use high-grade ore from Guinea, if the Simandouproject there comes to fruition, and mix it with lower Australiangrades, enabling greater expansion here.
Blends allow Rio to supply a consistent product to steel millsrather than ore types that vary and would require plantreconfiguration as new mines are brought on and others run out.
"We're looking at two options, either stockpiles whereblending is done close to the customer, or virtual blends," MrBauert said.
Virtual blends would involve steel mills receiving packages of orefrom different mines that they could blend themselves.
Pilbara blend products developed for Asian steel mills containabout 62 per cent iron ore, while Simandou's resources are close to67 per cent.
Rio Tinto is in the process of boosting its operated Australianproduction to a rate of 320 million tonnes a year by 2012, fromaround 200 million now, with further ambitions to lift that to 420million tonnes.
BHP is looking to boost its production from a rate of about 120million tonnes a year to 240 million tonnes in 2012 and 300 milliontonnes by 2015.
If Rio Tinto can get the massive Simandou project past the Guineangovernment and other development hurdles, it plans to eventuallyproduce 170 million tonnes from that region as part of a plan tomove total iron annual production to 600 million tonnes.
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