BHP Raises Forecast for Full Year Iron Ore Output

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Tuesday, October 22nd, 2013
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BHP Billiton has raised its full year production guidance for iron ore following a robust rise in output for the September quarter.

The mining giant has raised its guidance for iron ore output for the 2014 financial year from 207 million metric tonnes to 212 million metric tonnes, after producing 48.848 million tonnes of the key steel-making ingredient in the three months to September 30. These guidance figures include output by minority venture partners.

BHP’s iron ore output for the September quarter marks a 23 per cent increase year-on-year, as well as 2 per cent gain on the preceding quarter.

The results stand in marked contrast to the dour expectations of many leading analysts, with UBS AG forecasting a 6 per cent quarter on quarter decline.

Andrew Mackenzie, BHP’s CEO, said the rise in output was the result of the company’s renewed focus on productivity which was “already yielding results.”

“There is no better example than in our iron ore business, where the deployment of mobile crushing units and the continued debottlenecking of the supply chain has underpinned a five million tonne increase in Western Australia Iron Ore’s production guidance for the 2014 financial year,” Mackenzie said.

BHP CEO Andrew Mackenzie

BHP CEO Andrew Mackenzie

Upon replacing Marius Kloppers in the position of chief executive in May Mackenzie indicated he would bring a “laser-like” focus to costs and productivity.

The gains in iron ore output for BHP Billiton come just as the “big three” of the Australian iron ore sector endeavour to ramp up output despite tumultuous market conditions over the past eighteen months, with spot prices plunging below the USD$90 threshold towards the end of last year.

BHP is forging ahead with the development of new mines whose initial production capacity will be 35 million tonnes a year, bringing total capacity to 220 million tonnes per annum by the end of 2014, while Rio Tinto is expected to announce an expansion in output to 360 million tonnes a year before December.

Fortescue’s expansion of its Kings mine at the Solomon Hub in Western Australia will push the company’s annual output from 120 million tonnes to 155 million tonnes by the end of the year.

Underlying these efforts to expand iron ore output is renewed optimism about the Chinese economy – the chief market for Australia’s iron ore exports. At a recent presentation made before the Macquarie Western Australia Forum Jimmy Wilson, BHP Billiton’s President of Iron Ore, cited a forecast of 7.5 per cent expansion per annum in China’s GDP through to 2025, implying annual growth of 3.5 per cent for steel demand during the same period.

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