BHP Billiton remains bullish about the demand for iron ore, despite predicting that Chinese steel consumption will slow.
The world’s biggest miner said iron ore production for the full 2012/13 financial year was still expected to be five per cent higher than the previous year.
Analysts said the company’s September quarter production report was solid, showing WA iron ore operations produced 39.77 million tonnes of ore in the three months to September 30, up one per cent from the same period in the previous year.
Iron ore production was affected by a planned shutdown related to harbour expansion work.
The report, released on Wednesday, highlighted increased production of most of BHP’s resources and pushed the company’s share price 38 cents, or 1.2 per cent, higher to $33.45.
But the company predicts growth in the global iron ore market will slow to 650 million tonnes this decade, down from 800 million tonnes in the past decade.
Chief executive Marius Kloppers said while China’s steel consumption had now peaked, demand for commodities, such as copper, would still grow as the world’s most populous country moved from an investment-led to a consumption-led economy.
"As these cities and buildings are completed and as people continue moving to the cities, their future needs will include the next level of consumer goods being kitchen appliances, heating and air-conditioning, cars, and so on,” he told the Brisbane Mining Club today.
While this occurred, steel intensity per unit of GDP would continue to moderate and growth rates for iron ore and coal were likely to decrease.
The company said its Queensland coal production increased by 20 per cent in the three months to September compared to the preceding three months, in part due to a reduction in industrial action.
BHP’s total metallurgical coal production in the September quarter was down four per cent on the previous corresponding period, but energy coal production was up six per cent.
Mr Kloppers said Queensland’s coal industry was unlikely to expand further until issues such as royalties, taxes and declining productivity were tackled.
Production of petroleum products in the three months to September was up 19 per cent from the previous corresponding period, while copper and lead production fell in the September quarter, down 24 per cent and 6 per cent, respectively, from the previous corresponding period.
BHP believes Chinese demand for commodities such as copper, energy, aluminium would increase, while changing dietary habits would lead to higher demand for commodities such as potash.
It expects China’s GDP growth to be about 7 to 8 per cent this year and to sit around that level for the next 10 years.
Mine Life analyst Gavin Wendt said the iron ore division had produced a solid result while copper seemed to be staging a reasonably robust recovery.
"Iron ore production was really only impacted because of work to the harbour project expansion,” Mr Wendt said.
He said BHP had recently identified copper as its new “hot commodity".
The high Australian dollar and high labour costs were affecting BHP’s Queensland coal operations