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Rio boss defends expansion

UPDATE 2.35pm: Rio Tinto chief executive Sam Walsh has defended the company from criticism it is damaging the Australian iron ore industry, telling shareholders its expansion was well flagged and the miner's share of seaborne iron ore trade is the same as it was a decade ago.

Rio has been the target of criticism from Premier Colin Barnett and Fortescue Metals Group chairman Andrew Forrest over its expansion plans in recent months as the iron ore price tumbled.

Rio sticks by growth plan

Mr Forrest has blamed Rio’s running commentary on its expansion plans for depressing short term iron ore prices, and claimed the global mining giant had undermined the Australian iron ore industry and damaged the wider economy.

But Mr Walsh told shareholders at this morning’s annual shareholder meeting in Perth that Rio’s expansion plans were flagged some years ago and were well understood by the market.

The Rio boss rejected suggestions Rio was playing a “last man standing” game to win market share at the expense of smaller players such as Fortescue.

"A decade ago when I led the iron ore group, public commentary on iron ore was somewhat more moderate than it is today," he said.

"Back then, no-one wanted to talk about iron ore.

"Nowadays, everyone has a view on the factors at play in the market, be it related to price, demand, supply or sentiment.

“So, can I suggest to you that Rio Tinto’s well-flagged investments over many years, and the fact our market share today of 20 per cent, is the same as it was a decade ago.

"This invalidates suggestions that we are responsible for a perceived market dislocation.”

One of the major criticisms made by Mr Forrest and other market commentators has been Rio’s belief that Chinese steel demand will peak at a billion tones a year significantly overestimates the country’s growth rate.

In response to questions asked by a shareholder this morning, Rio chairman Jan du Plessis defended that projection, saying it was based on official statements by the Chinese government, and was backed up by the company’s own market intelligence.

“Our board spent yesterday morning discussing events in China, how we look at economic development in China, how we think about the future of steel demand in China," he said.

"I can confidently say that we continue to believe that the long run peak steel demand in China has a long way to go to approximately the billion tonnes we indicate.

"That’s not a pretence, that’s not a facade, that’s a serious conclusion we came to after long debate.

“Despite perceptions that we are flooding the market with iron ore, we are not flooding the market with iron ore.

"We have no desire to flood the market with iron ore.

"We have absolutely no desire to push competitors out of business.

"But this is a globally competitive business, and if we as a company don't do the things we need to do to stay competitive and continue to supply our customers with a high quality product at competitive prices, we will suffer, Western Australia will suffer and the country will suffer."

Rio shares were off 58 cents to $58.54 at the close of trade.