Jan. 20 (Bloomberg)
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 the 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 today in a statement.
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 today.
“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 1 percent to A$43.76 at 10:10 a.m. Sydney time 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 jumped 17.7 percent in December and U.S. manufacturing expanded at the fastest pace in more than three years, boosting demand for raw materials and London metal prices by 18 percent. The steel market will grow by 9.2 percent in 2010, on rising demand from the U.S., Japan and Europe, the World Steel Association has said.
Price Recovery
“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 today in the statement. “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 jump 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.
BHP’s output of petroleum, its third-biggest earner, rose 16 percent to 38.4 million barrels of oil equivalent, the company said. UBS AG forecast iron ore production of 27.3 million tons in the second quarter and total petroleum output of 39 million barrels of oil equivalent.
Alumina, Zinc
Production also increased for alumina, zinc, diamonds and nickel, the company said. Coking coal, used to make steel and BHP’s second-biggest earning unit, declined 12 percent because of maintenance.
Uranium production from Olympic Dam, the world’s largest uranium deposit, was 60 percent lower as repair work on the damaged main ore-transport shaft continued. Copper output was also cut. BHP declared force majeure after a mechanical failure forced the shutdown of the shaft at the underground mine on Oct. 6. Shaft production is expected to resume this quarter, though the repair work will be regularly reviewed, it said.
Rio and BHP last month agreed to the terms of an iron ore joint venture that will save them at least $10 billion. The plan, announced in June, is to combine mines rail, ports and workforces in Western Australia’s Pilbara region. The venture is expected to be completed in the second half of this year, Rio said last week.
Source: Rebecca Keenan. www.businessweek.com/news