Rio Tinto warns of risks

File photo / NZ Herald

Global miner Rio Tinto says urbanisation and industrialisation will continue to drive demand for metals and minerals, but there are risks in the short term.

"Although long-term fundamentals for growth are strong, there are downside risks in the short term, and potential for medium-term volatility due to persistent economic imbalances," Rio Tinto chairman Jan du Plessis said in the company's annual report.

"Financial systems remain fragile, particularly in Organisation for Economic Co-operation and Development [OECD] countries.

"The increase in sovereign debts, and government measures to address fiscal imbalances, are likely to temper short-term growth."

Du Plessis said Rio would have to deal with skills shortages and technical challenges as it expanded into more risky areas to meet rising demand.

"We will need to overcome skills shortages as we compete for new talent not only with other mining companies, but also with other expanding sectors, such as oil and gas," du Plessis said.

Rio chief executive Tom Albanese said the momentum of recovery in major economies would remain uncertain and volatile as the effect of the fiscal and monetary stimuli faded.

"Therefore, we remain cautious about the short-term view of the economy," he said in the annual report.

"Globally, we expect GDP growth in 2011 to continue at broadly healthy levels of around 4.5 per cent.

"However, the pace of economic recovery will vary between the different markets we supply."

Albanese said longer-term fundamentals were strong.

Much of the anticipated growth in demand for minerals would be driven by China and other emerging economies.

- AAP