Rio Tinto's chief sees one ‘key source of uncertainty’ for iron ore

The primary area of uncertainty for iron ore prices rests squarely within China's borders, according to Jean-Sébastien Jacques, chief executive for Rio Tinto.

Speaking with CNBC on Saturday morning at the China Development Forum in Beijing, Jacques said that iron ore volatility won't come from questions about the strength Chinese economy — he said it appeared solid. It won't come from China's rebalance within the steel industry — which he said could help companies like Rio Tinto. Instead, all eyes will be on Chinese iron ore production as the major question mark for prices.

That's the "key source of uncertainty, and therefore potentially volatility, in terms of iron ore prices," he said.

"It's going to be interesting to see what will happen as we get into summer months — are they going to restart some of this capacity. Depending on this decision, it may have an impact on the iron ore prices," he said.

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Jean-Sébastien Jacques, chief executive for Rio Tinto, speaks with CNBC in China.

"I would say that there is a risk of volatility."

The only other major component for iron ore prices is capacity in places like Brazil and Australia, he said, but those factors are already reflected in the price.

Jacques also reflected Sunday on the strength of the Chinese economy, telling CNBC that "all the indicators are moving in the right direction."

"We have a pretty good understanding of what the situation is in China, and today when I look at all the books, I've got no concerns whatsoever," said.

As for Beijing's approach to specific industries, Jacques said "there is no real doubt" that China will restructure its steel industry because of pollution issues. Still, he said, that doesn't mean that officials will reduce the steel output.

"They will shut down the smaller, less-efficient, more-polluting blast furnaces, but at the same time they will refocus all their production on the newest, largest blast furnaces," he said, reflecting that it could be "a great piece of news" for Rio Tinto as such a shift will require higher quality raw material.

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