MELBOURNE: BHP Billiton has reported a surge in fourth-quarter production, with strong Chinese demand sparking record output of key commodities.

But the resources giant has warned of volatility in the short term outlook for its commodities, due to uncertainty about the speed of recovery in developed economies and China's moves to constrain liquidity.

BHP Billiton's iron ore production jumped 11 per cent to 32.45 million tonnes for the three months to December 31 compared to a year earlier, the miner reported on Wednesday.

That took half year production to a record 62.56 million tonnes, up 6 per cent on the prior corresponding half. Petroleum products production jumped 16 per cent to 38.36 million barrels of oil equivalent (boe) in the fourth quarter, from a year earlier, driving the half-year number up 17 per cent to a record 79.57 million boe.

"During the December quarter, we saw strong price recovery across the commodity suite driven by demand in China and restocking in the developed world," BHP Billiton said.

Government stimulus measures appeared to support a gradual return to normalised global trade. But BHP Billiton warned the speed of recovery in the developed economies remained uncertain. The company also cautioned that China's moves to control loan growth could have an effect on demand.

"Consequently, we expect some degree of volatility in the short term outlook for commodities," it said.

Shortly after issuing the warning on Wednesday, Australian and international markets were sent into spin after a report said some banks in China had been told to stop all lending for the rest of January.

BHP Billiton said prolonged problems at the Olympic Dam project hit copper and uranium production, with output of both commodities down sharply.

Copper production was down 12 per cent in the December quarter compared to the prior corresponding period, and 5 per cent lower than in the September quarter. Production of uranium oxide concentrate collapsed 60 per cent in the last three months of 2009 compared to a year earlier, and was down 69 per cent on the preceding quarter.

Olympic Dam in South Australia has been operating at only 25 per cent of capacity since October last year. The outage came after the collapse of the automatic haulage system, which carries ore from underground to surface processing facilities.

Nickel production in December jumped 20 per cent to a record 49,000 tonnes on the performance of Australian Nickel West operations. BHP produced 84,400 tonnes in the half year, a 45 per cent surge from the prior corresponding half.

Zinc production also surged 58 per cent in the fourth quarter to 59,835 tonnes due to higher mining grades.

Production jumped 33 per cent to 106,260 half on half. Coal production slipped, with metallurgical coal falling 5 per cent to 18.3 million tonnes half on half because of planned maintenance at Queensland Coal and longwall moves at Illawarra Coal.

Despite the lower production, the company shipped record quantities of the fuel, which is used to make steel, in response to stronger demand.

Energy coal production slipped 1 per cent to 35.5 million tonnes half on half as its Cerrejon project in Columbia faced lower demand, New Mexico had planned outages and BHP's South African mines had unplanned maintenance and weather interruptions.

Production of alumina, silver and diamond production rose, lead was flat and manganese ore and alloy fell.

Resources analyst with Mine Life, Gavin Wendt, said the report was good overall. "The only weakness was for copper and uranium, and that was pretty much anticipated by the market."

Shares in BHP Billiton closed up nine cents at A$43.41 ($54.61).