BHP raises Q3 iron ore output by 11% to meet Chinese demand

Updated: 2010-04-21 14:01
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BHP Billiton Ltd, the world's largest mining company, raised third-quarter iron ore output by 11 percent, less than Credit Suisse Group AG forecast, as demand from Chinese steelmakers surged.

Output of the ore, the company's biggest earner in fiscal 2009, was 31.16 million tons in the three months ended March 31, up from 28.19 million tons a year earlier, Melbourne-based BHP said today in a statement. That compares with the 33.25 million tons estimated by Credit Suisse, and is a 4 percent decline from the previous quarter.

Wet weather and expansion projects curbed BHP output of iron ore, used in steelmaking, limiting its ability to benefit from China's 22 percent jump in steel production in the quarter. Rival Rio Tinto Group, the second-biggest iron ore supplier, last week also missed output forecasts by Credit Suisse, Goldman Sachs JB Were Pty and UBS AG because of heavy rains.

"Production was generally lower than our forecasts," Royal Bank of Scotland Group Plc analyst Lyndon Fagan said by phone from Sydney. "Iron ore was impacted more than expected by the weather."

BHP was little changed at A$42.79 ($39.84) at 11:08 am Sydney time on the Australian exchange. Rio Tinto Group rose 0.4 percent to A$78.89. Fortescue Metals Group Ltd., which yesterday said iron ore shipments jumped 53 percent in the March quarter, rose 2.1 percent to A$5.27.

The Rapid Growth Project 4 iron ore expansion is "progressing well," BHP said. Year-to-date production for the material was a record, it also said.

Rio and BHP in June agreed to form an Australian iron ore joint venture, combining mines, rail, ports and workforces, to save at least $10 billion. Rio last week posted iron ore output of 43.4 million tons, lower than the 45.8 million tons to 49.3 million tons forecasts by the three brokerages.

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Coking coal, used to make steel and BHP's second-biggest earning unit, increased 7 percent on year. Output dropped 8 percent from the previous quarter after the company declared force majeure on shipments from the Hay Point terminal in Queensland after storm damage.

Force majeure is a legal clause that allows a company to miss deliveries because of circumstances beyond its control.

Production of petroleum, its third-biggest earner, increased 16 percent to 36.84 million barrels of oil equivalent in the March quarter from a year ago, the company said. Output for copper fell 19 percent, while production for lead, zinc, nickel and silver rose, the company said. Diamond output was lower.

BHP's quarterly production for copper and metallurgical coal also missed Credit Suisse's expectations.

Uranium production from the Olympic Dam mine in South Australia, the world's largest deposit of the material, fell 90 percent from a year ago after a transport shaft was damaged. BHP declared force majeure after a mechanical failure shut down the shaft last October.

The company restarted works to bring output at the Clark Shaft back to full capacity during the March quarter, and it expects to return to normal operation by the end of the June quarter, BHP said today.

Market prices for ore for immediate delivery into China, the biggest buyer, gained 30 percent in the March quarter to $155 a ton. The price for 62 percent fines delivered to China yesterday stood at $180.8 a ton, according to The Steel Index.

Global seaborne demand is estimated to increase 12 percent to 1 billion tons this year, according to UBS. China's economic growth accelerated to the fastest pace in almost three years in the first quarter, rising 11.9 percent from a year earlier, the statistics bureau said on April 15.