BHP ups iron production as prices slide

 
City A.M. Reporter
GLOBAL miner BHP Billiton reported a 24 per cent jump in quarterly iron ore production yesterday, its foot stuck firmly to the accelerator even as prices for the steel-making commodity slide and Chinese steel mills wind back output.

BHP’s iron ore production for the September quarter largely met market expectations, putting it on a record annual run rate of 173m tonnes and mirroring ramp-ups from bigger rivals Rio Tinto and Brazil’s Vale.

BHP said improvements to its Australian rail system, which hauls iron ore from desert mines to the coast, helped boost production. It gave no comment on demand in the quarterly report but it has always maintained that it sells all it mines.

But with iron ore prices tumbling in recent weeks, there are question marks over the near-term outlook, given that the world’s biggest iron ore consumer, China, faces pressure on steel margins as Beijing engineers a soft economic landing.

Chinese crude steel production in September fell to its lowest point in seven months.

“The overall market is in panic as small mills have started to shut down some blast furnaces, while big ones are relying on their existing iron ore inventories and reduced buying,” an iron ore trader in China said on the eve of BHP’s production report.

The world’s biggest iron ore miner, Vale, also appears to be responding to the weakening demand from some Chinese mills, offering to sell them cheaper spot-priced ore rather than ore priced under quarterly contracts.

Spot iron ore fell almost 70 per cent to $56 a tonne in November 2008 after the global financial crisis struck, then almost tripled to a high of around $192 last February. It has since slumped 22 per cent to around $150.