News Room - Steel Industry

Posted on 22 Jan 2010

BHP iron ore output leaps to new high

BHP Billiton Ltd, the world's largest mining company, said second-quarter iron ore production rose 11 percent to a record as commodity prices recovered because of demand from China and developed economies.

 

Output of the ore, its biggest earner in fiscal 2009, was 32.45 million metric tons in the three months ended Dec 31, compared with 29.4 million tons a year earlier, the Melbourne-based company said yesterday.

 

BHP joins rival Rio Tinto Group and Posco, Asia's most profitable steelmaker, in raising production as demand from automakers and builders rebounds with the global economic recovery. Most key indicators across developed economies showed improvement in the quarter, BHP said.

 

"Over the next three to five years, you would be very confident that the steel market should grow," said Tim Schroeders, who helps manage $1.1 billion at Pengana Capital Ltd in Melbourne, including BHP. He expects its earnings estimates to be upgraded about 5 percent. "They met expectations."

 

BHP gained 0.2 percent to A$43.41 at the 4:10 pm Sydney time close on the Australian stock exchange. Citigroup Inc added BHP to its "most favored" list of stocks on Jan 18, citing growing production and a strong balance sheet.

 

China's exports rose 17.7 percent in December and US manufacturing expanded at the fastest pace in more than three years, boosting demand for raw materials and London metal prices by 18 percent.

 

Expanding market

 

The steel market will expand by 9.2 percent in 2010, on rising demand from the US, Japan and Europe, the World Steel Association has said.

 

"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 said. "Going forward the speed of recovery in the developed economies remains uncertain, particularly considering the eventual withdrawal of government stimulus."

 

BHP had iron ore production of 30.1 million tons in the quarter ended Sept 30. Rio Tinto, the second-largest iron ore exporter, last week reported a 49 percent rise in December quarter output. Vale SA is the largest iron ore exporter.

 

This year "should see the return of real physical demand for commodities", Deutsche Bank AG analysts led by Paul Young said in a report this month. Young increased his 2011 full-year earnings per share forecast for BHP by 26 percent on increased metal price forecasts.