* BHP Q4 iron ore output jumps 15 pct
* Coking coal output up 2 pct despite disruptions
* Warns Queensland coking coal margins squeezed
* Steps up onshore U.S. oil output in weak gas market
* BHP shares fall 0.5 pct in early trade
By Sonali Paul
MELBOURNE, July 18 (Reuters) – BHP Billiton
posted strong growth in iron ore production in the June quarter
and said it expects to lift Australian iron ore output by 5
percent in the 2013 financial year, despite risks of cooling
demand in top customer China.
With Australia’s top three iron ore producers, Rio Tinto
, BHP and Fortescue Metals Group, busy
expanding output, worries are growing over a profit squeeze with
iron ore prices down around a quarter from a year ago as Chinese
steel mills cut stocks.
“Investors are going to place increased attention on the
ability of the market to absorb supply increases, particularly
at a time when profitability in the steel industry is
negligible,” said Tim Schroeders, a portfolio manager at Pengana
Capital, which owns shares in BHP and Rio Tinto.
BHP’s shares fell 0.8 percent in early trade, though held up
better than Rio Tinto and Fortescue, which are more heavily
exposed to iron ore.
BHP reported on Wednesday a 15 percent rise in iron ore
output to 40.9 million tonnes in the quarter from a year
earlier, taking it to a record annual output of 159 million
tonnes.
Thanks to the expansion of railway lines and the addition of
new ship loading capacity, BHP was producing at a rate of 179
million tonnes a year in the June quarter, as it ramps up to
reach a target rate of 220 million tonnes a year in 2014.
BHP, the world’s no.3 iron ore miner behind Brazil’s Vale
and Rio Tinto, is due to decide by December whether
to go ahead with the first stage of what could eventually be a
$20 billion expansion to nearly double its iron ore capacity in
Western Australia beyond 2014.
The ambitious plans come as spot iron ore prices dropped half a percent to $129.40 a tonne on
Wednesday, the lowest since November, as weak Chinese steel
demand pressured steel prices, curbing appetite for the raw
material.
Rio Tinto reported flat quarterly iron ore
output on Tuesday, while smaller rival Fortescue Metals Group
posted a 54 percent jump in production, on track to
reach 155 million tonnes a year by mid-2013, just behind BHP.
“It’s a good result, but didn’t shoot the lights out,” said
CLSA analyst Hayden Bairstow, predicting BHP’s shares would
drift lower after the result, matching what happened to Rio
Tinto’s shares after it gave a bearish global outlook.
FORCE MAJEURE ON COAL LIFTED
Output of coking coal, a major revenue earner for the
world’s biggest producer, was the least predictable among BHP’s
products in the final quarter of its financial year and provided
the main surprise.
Coking coal production rose 2 percent in the quarter to 8.1
million tonnes from a year earlier. Some analysts had expected a
drop in output due to disruptions at its Queensland mines after
strikes and heavy rains, which led it to declare force majeure
earlier this year.
Force majeure relieves a company from its contractual
obligations due to circumstances beyond its control.
BHP said on Wednesday it lifted force majeure this month as
it neared a resolution of the 18-month long union dispute over
pay and conditions.
But the company BHP warned that due to the Queensland
production disruptions, coking coal margins had been squeezed.
U.S. OIL PRODUCTION
BHP also reported a 10 percent rise in onshore U.S. oil
production and said more than 80 percent of its onshore drilling
activity was focused on the liquids rich parts of the Eagle Ford
shale and Permian Basin instead of natural gas.
The onshore oil production is being closely watched due to
concerns in the market that BHP badly timed its $17 billion
acquisition of U.S. shale gas assets last year, just ahead of a
slide in gas prices to 10-year lows.
Analysts are expecting a writedown of at least $2 billion on
its shale assets when it reports annual results in August.
Copper production rose 15 percent to 312,500 tonnes in the
final quarter of BHP’s financial year from a year earlier and
compared with a forecast of 311,200 tonnes from UBS.
BHP had flagged annual output would be shored up by a strong
increase in the fourth quarter from the Escondida mine in Chile.
