BHP's iron ore production surges 16pc

BHP Billiton, the world's largest mining company, said fourth-quarter iron ore production rose 16 per cent, driven by expansions at its Australian mines and surging global steel demand.

Output was 31.2 million tonnes in the three months ended June 30 compared with 27.1 million tonnes a year ago, the Melbourne-based company said yesterday. That compares with a 32 million tonne estimate by Credit Suisse Group.

Australia, the world's largest iron ore exporter, will boost sales 50 per cent this fiscal year, according to Government estimates, as BHP and Rio Tinto Group expand output. Production of iron ore and petroleum, BHP's No 1 and No 3 earners, notched up annual records.

"Given their key earnings metrics this is a pretty good result," Chris Weston, head of institutional dealing at IG Markets in Melbourne, said yesterday. "The iron ore production shows they want to continue growing." BHP continued to be cautious on the global economy's short-term outlook.

"Within China, measures introduced to reduce growth to more sustainable levels means volatility in commodity end-demand is likely to persist. BHP ... sees these measures as a normal continuation of China's economic management policies."

Full-year iron ore output for the year was 125 million tonnes and production in Western Australia was a record for a 10th straight year, BHP said. Morgan Stanley last month said prices would average 93.5 per cent higher this year than last.

Rio and BHP, the world's second-and third-largest producers of the material used to make steel, are seeking to combine their operations in Australia's Pilbara region to save US$10 billion ($13.9 billion).

Rio last week reported a 2 per cent drop in ore output to 43.6 million tonnes for the quarter because of scheduled shutdowns. Brazil's Vale is the world's largest iron ore producer.

Sales of the ore contributed 21 per cent of BHP's total revenue in fiscal 2009, shows Bloomberg data. BHP is expanding its Pilbara iron ore mines to 240 million tonnes.

The World Steel Association said on Tuesday that global steel production rose 18 per cent to 119 million tonnes last month. The cost of 62 per cent iron ore delivered to the Chinese port of Tianjin, which fell to a six-month low on July 14, rose for a fourth day yesterday - up 3 per cent to $121.60 a tonne, according to The Steel Index.

Output of coking coal, used to make steel and BHP's second-biggest earning unit, rose 16 per cent to 10.9 million tonnes in the quarter, beating Credit Suisse's forecast for 8.9 million tonnes.

Energy coal output was 16.3 million tonnes, down 8 per cent.

Total production of petroleum, its third-biggest earner, increased to 41 million barrels of oil equivalent. That compares to Credit Suisse's estimate of 42 million barrels.

- BLOOMBERG