BHP Iron-Ore Output Dispels Fears Regarding China
MELBOURNE, Australia— BHP Billiton posted record iron-ore and petroleum output for its fiscal first quarter and said it is seeing improvements in demand for steel-making materials.
Increased shipments of Australian iron ore and coking coal to Asian steelmakers has been common among miners recently, and analysts said the BHP numbers should dispel lingering fears that tensions between Australian miners and China are affecting sales.
BHP said it is seeing improved demand for commodities used by a recovering steel sector. But the miner retained a cautious outlook.
BHP said restocking of commodities in China is complete, meaning a better picture of real Chinese demand should emerge over the rest of the calendar year. But the company said there is little evidence of sustainable demand from developed economies, despite some positive early signs.
Iron-ore production for the quarter ending Sept. 30 rose 1% from a year earlier and 11% from the previous quarter to a company record of 30.1 million metric tons.
ABN AMRO analyst Warren Edney said the output came in slightly below his expectations.
Austock analyst Tim Gerrard said the improvement in BHP’s iron-ore shipments and the performance of other iron-ore miners should end talk that Australian sales had been hurt by tensions with China over long negotiations regarding a benchmark iron-ore price and the detention of four Rio Tinto employees.
Rio Tinto, a potential future joint-venture partner of BHP, posted quarterly production of 47.5 million tons, up 12% from a year earlier and 5% from the previous quarter.
“The market was jumping at shadows a couple of months ago when the Rio people were detained and people were expecting the worst,” Mr. Gerrard said. “There were fears that the Chinese were not taking as many shipments, but all of that has come to naught.”
BHP’s report also contained more detail on an Oct. 6 accident that forced BHP to declare force majeure on copper and uranium sales from its Olympic Dam operation in South Australia state. The declaration is a means to avoid contractual committments because of an event beyond the company’s control.
BHP said damage to the main haulage system at Olympic Dam meant ore is expected to run at about 25% of capacity until full production resumes in the fiscal third quarter.
The length of the outage is roughly in line with what the market had been expecting and, while it won’t have a significant impact on BHP’s earnings, it may tighten copper and uranium markets.
BHP’s first-quarter copper production fell 8% from a year earlier. The miner cited maintenance activities at Escondida in Chile and Olympic Dam.
BHP’s petroleum output climbed 18% from last year and 10% from the previous quarter to 41.2 million barrels of oil equivalent.
By Alex Wilson
Wall Street Journal
10/22/09
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