Rio Tinto Alcan Plans to Cut Capital Spending in 2010 (Update1)

Sept. 21 (Bloomberg) -- Rio Tinto Group, the world’s third- largest mining company, plans to cut capital spending by 15 percent at its Alcan aluminum unit next year as the outlook for a recovery in demand remains mixed. Rio Tinto Alcan is seeking to reduce so-called sustaining capital spending to $500 million in 2010, from a forecast $586 million in 2009, Phillip Strachan, the unit’s chief financial officer, said today in a presentation. The company is studying its budget for growth capital spending for next year and is forecasting expenditure of $1.1 billion this year, it said. Supply of aluminum will outpace demand this year and next, Barclays Capital said last month. The metal was the biggest contributor to Rio’s sales in 2008, accounting for 42 percent, followed by iron ore at 30 percent. Prices slumped 36 percent last year as demand in China dropped. “For the time being, the recovery signs in aluminum main end-use markets are still mixed,” Carmine Nappi, vice-president industry analysis, said in the presentation. “We remain cautious because some headwinds are also at work.” Rio fell 0.1 percent to A$61.05 at 10:07 a.m. Sydney time on the Australian stock exchange. The price of aluminum for three-month delivery on the London Metal Exchange was little changed at $1,920 a metric ton at 10:24 a.m. Sydney time. There’s “the possibility of a W-shaped scenario where growth returns for a few quarters before petering out once more,” Rio said. “This would slow down aluminum shipments and make additional contributions to an already high stock level.”