LAUNCESTON, Australia, Aug 26 (Reuters) – One of the first steps in recovering from a debilitating condition like alcoholism is admitting you have a problem. It seems BHP Billiton has finally started down this path with iron ore.
In announcing a 52-percent plunge in annual profit on Tuesday, Chief Executive Andrew Mackenzie also lowered BHP’s forecast for the peak in Chinese steel output to between 935 and 985 million tonnes by the mid-2020s.
This was down from the previously long held target of 1 to 1.1 billion tonnes that had underpinned BHP’s massive expansion of its iron ore mines, which has more than doubled output in the past five years to a total of 254 million tonnes in the 2014-15 financial year.
The scaling back of BHP’s China steel forecast leaves Sam Walsh, the chief executive of rival Rio Tinto, as one of the last holdouts for a peak above 1 billion tonnes.
Walsh said after releasing Rio’s results, which saw a 43-percent drop in underlying earnings, that his company was “holding the line” on the 1 billion tonne by 2030 forecast, saying this represented growth of just 1 percent per year over the period.
Walsh is starting to cut a lonely figure when it comes to China’s peak steel, with the market consensus increasingly swinging behind the view of the China Iron & Steel Association that the best is already behind us.
China’s steel output of 823 million tonnes in 2014 may not be reached in 2015, with production in the first seven months of the year totalling 476.04 million tonnes, down 1.8 percent on the same period last year.
However, it would be a mistake to think that Mackenzie has suddenly turned bearish on China, saying he remains confident on the long-term outlook for commodities demand even though “we expect ongoing economic reforms in China to contribute to periods of market volatility”.
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