BHP won’t cut iron ore output
BHP Billiton says it will maintain iron ore output, and is hoping to minimise deferrals until the year-end in June 2009.
Posted: Monday , 17 Nov 2008
SYDNEY (Reuters) -
BHP Billiton, the world's No. 3 iron or miner, has had requests from some customers to defer up to 5 percent of this year's production, about 6 million tonnes, the company said, the latest big miner to feel the effects of declining global steel production.
BHP had no plans to cut output following the requests and was looking at ways to minimise the deferrals over the remainder the business year to June 30, 2009, BHP spokesman Peter Ogden told Reuters on Monday.
"We have received some requests for deferrals of shipments from some customers," Ogden said. "The important point is that we are not cutting production," he said.
The world's biggest iron ore miner, Brazil's Vale VBALE5.SA has already cut output 10 percent, or 30 million tonnes, and says it remains flexible to the needs of customers to reduce ore deliveries, while No. 2 Rio Tinto a big supplier to China, is also pledging to cut 10 percent, around 20 million tonnes, by the end of this year.
Ogden said the requests to hold back on filling the orders could equate to up to 5 percent of output from BHP's west Australian iron ore mines over the course of the business year.
"We are actively working with our customers to reduce this number," he said. "It's about working your way through what is currently obviously a challenging period."
Another Australia miner, Fortescue Metals Group, last week shaved 2 million tonnes off its Dec. 31 target of 22 million tonnes.
Ogdens said the latest developments had not changed BHP's mind over expanding iron ore mining in the Pilbara region.
By 2012 the company expects to roughly increase annual output by 100 million tonnes to 240 million, then to 300 million in 2015, he said.
"The long-term story remains intact," he said.
In 2008, the world's three biggest miners combined will sell more than half a billion tonnes of ore at hefty prices of around $85 a tonne under terms negotiated mid-year when the steel sector was running hot.
This has left them largely insulated from the dramatic drop in other raw materials prices, such as copper, down around 40 percent, nickel off 55 percent and aluminium 19 percent lower.
That should end when new contract prices take effect for the shipping year starting April 1, 2009, according to sector analysts.
ArcelorMittal, the world's biggest steel company, is reducing its production by 37 percent as demand falls.
In China, which makes more steel than any other country and holds considerable sway over price benchmarking, crude steel production will drop 15 percent to 420 million tonnes in 2009, according to UBS analyst Hubert Tang.
Globally, Vale estimates steel making is already down 20 percent. (Reporting by James Regan; Editing by James Thornhill)
