UPDATE 2-BHP and Australian rivals raise iron ore targets as competition grows – by James Regan (Reuters India – April 16, 2014)


SYDNEY, April 16 (Reuters) – Australian miners are racing ahead with plans to expand iron ore production to capture more of the Chinese market for the steelmaking ingredient, amid strong competition from the world’s biggest supplier Vale of Brazil.

Efforts to beat already ambitious output targets comes as a crackdown in China on using commodities as collateral to raise cash risks unleashing iron ore sales from tens of millions of tonnes sitting in Chinese port warehouses, pressuring prices.

Fortescue Metals Group Ltd, which is raising production 57 percent this year, says its needs iron ore prices to stay between $110-$120 a tonne for the next 12-18 months in order to pay off a targeted $2.5 billion in debt.

The Australian Bureau of Resources and Energy Economics forecast an average price of $110 a tonne this year but only $103 a tonne in 2015. By 2016, Citigroup sees the price falling to $80.

Iron ore was quoted at $117.10 .IO62-CNI=SI on Wednesday. BHP, the world’s biggest diversified mining company, on Wednesday lifted full-year iron ore production guidance by 5 million tonnes to 217 million as it pushes ahead with new mine work in Australia.

That’s still behind Australian rival, Rio Tinto , which is close to mining 300 million tonnes a year and Vale, which is targeting annual output of more than 360 million tonnes, with longer term plans to exceed 400 million.

China imports more than a half-billion tonnes of iron ore annually to supplement domestic production of mostly lower-grade ore. China’s crude steel production rate of some 2 million tonne a day makes it by far the world’s biggest consumer of iron ore.

Output from BHP’s most profitable division rose 1 pct to 49.6 million tonnes in the three months ended March 31 versus the previous quarter — above forecasts, according to Macquarie Bank.

Against the same quarter last year, output was up 23 percent, data from BHP’s quarterly production report showed.

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