Rio Tinto's Balancing Act

Copper prices might be rising, but the global slump in demand for commodities has yet to ease up on Rio Tinto. The mining giant said Wednesday that its first-quarter aluminum output dropped by 6.0%, and its iron ore production fell by 15.0% as the prospects of a quick global economic recovery remained uncertain. And while its refined copper output rose 33.0%, economists believe the demand is not sustainable. “Markets remain volatile and the timing of global economic recovery uncertain," said Rio chief executive Tom Albanese. Rio Tinto said it was still hoping for a rise in steel demand on the back of China’s expected recovery in the second half of the year. Analysts seem to share that view. John Anton, steel specialist with IHS Global Insight, told Forbes he expected to see a halt in the recent slide of commodity prices, particularly in the second half of 2009. “The recovery in China will help demand for construction and also consumer-related products. It will help steel, aluminum, copper, cement and a broad a range of commodities. Most commodity prices have dropped already and should be near their floor,” Anton said. The economist added that nickel and aluminum prices have dropped “tremendously” over the last year. “In some cases we are near or below the cost of production so producers are not going to produce as much. Most metal commodities should be near their floor already.” Expectations of China’s recovery have sent copper prices surging 50.0% this year, but Anton said that particular rally was not sustainable over the long term. Rio’s output figures were released on the day shareholders met in London to discuss its proposed $19.5 billion asset and shares sale to the state-owned Aluminum Corp. of China, or Chinalco. Rio Tinto is hoping its alliance with Chinalco will resolve its $38.7 billion debt problem in one go. But some of Rio Tinto's ( RTP - news - people ) institutional investors are upset about the board’s decision to sell several of the miner's most-prized assets to the Chinese company.