UPDATE 4-BHP blinks as iron ore prices fall, delays output boost – by James Regan (Reuters U.S. – April 22, 2015)


SYDNEY, April 22 (Reuters) – BHP Billiton is slowing down its expansion plans in iron ore, the first big miner to pull back as a global supply glut sends ore prices tumbling.

The world no. 3 producer said it would delay an Australian port project that would have boosted output by 20 million tonnes and buoyed annual output to 290 million tonnes by mid-2017.

While BHP’s pullback is small compared with overall seaborne iron ore trade of around 1.3 billion tonnes, it is viewed as significant given BHP’s position as an efficient producer.

“It is probably more a symbolic posturing position by BHP, but it also likely signals the bottom of the iron ore market, given this action is being taken by one of the lowest cost producers,” said Mark Pervan, head of commodities for ANZ Bank.

Some analysts said the move suggests BHP expects ore prices to rise later in the decade, when it hopes to control a greater share of the global seaborne trade than it does now.

“BHP is simply saying, why spend the money now to produce more when the ore may well be worth more at a later date when supply from other sources backs off,” said David Lennox, a mining analyst with Fat Prophets.

Two small iron ore firms have recently shut mines in Australia because of low prices and Goldman Sachs says half the world’s so-called “tier two” miners are at risk of closure.

Spot iron ore prices .IO62-CNI=SI have fallen 60 percent in the past year on surging output blamed on overestimates of China’s appetite for imported ore by mega miners BHP, Vale and Rio Tinto .

Analysts, however, do not expect the big-tonnage miners like Rio, who have ignored calls to curtail expansions to revive prices, to follow BHP’s lead.

Small supply adjustments are also unlikely to have much impact on prices of the steelmaking ingredient that have plunged to near $50 a tonne from almost $200 four years ago, they said.

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