PERTH – BHP Billiton expects to expand its iron ore capacity by nearly a fifth just by working its mines, rail lines and port harder as it looks to control costs in a softer iron ore market, the global miner’s iron ore chief said on Wednesday.
Uncertainty over iron ore prices due to stuttering demand for the steel making ingredient from China has prompted a rethink of expansion plans by most iron ore miners, including top global iron ore miner Vale.
BHP has slowed its growth plans, like Australia’s no.3 iron ore miner Fortescue Metals Group, while their bigger rival Rio Tinto is pressing ahead with an expansion that will give it at least a third more capacity than BHP and more than double Fortescue’s capacity.
“Looking forward, things are not as rosy as they were in the past. The imperative to grow as aggressively as we were in the past has diminished slightly,” Wilson said at a conference.
Caught out by escalating costs, a sharp slide in iron ore prices and a persistently strong Australian dollar, BHP shelved plans in August to build a $20 billion iron ore harbour at Port Hedland in Western Australia that would have eventually doubled its iron ore capacity to 440 million tonnes.
BHP is focusing instead on milking as much out of its existing inner harbour, rail line and mines, increasing its capacity in smaller steps without huge capital outlays.
The company now expects to reach 260 million tonnes, or 40 million tonnes more than the current target that it will reach with the nearly completed expansion of its inner harbour at Port Hedland and the opening of the Jimblebar mine.
“The aspiration would be, just by squeezing our existing infrastructure with modest capital investments across our business, to be able to achieve around the 260 million tonne mark,” Wilson told reporters on the sidelines of the conference.
He gave no timeframe or cost for achieving the higher target after it reaches 220 million tonnes a year in 2014.
Analysts said BHP’s and Fortescue’s deferral of growth plans reflected more on lower cash flows rather than longer term pessimism about China’s growth and demand for iron ore.
“This is more about conserving capital in the current environment than concern over weaker markets,” said Fat Prophets mining analyst David Lennox.
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