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BHP Billiton (LSE:BLT), the world’s largest mining company, is predicting increased iron ore production in the current financial year, disregarding earlier predictions of a slowdown in the global economy.
The prediction comes as BHP reported that its second-quarter iron ore production increased by a better-than-expected 22% . The company said ore production was 41.1 million metric tonnes, judge against 33.7 million tonnes a year earlier.
The Melbourne-based company issued the report just a day after rival Rio Tinto reported an increased production of the commodity needed to make steel during the same period.
There have been widespread concerns that a slowdown in the global economy may be unprofitable for the mining industry; however, the recent report by BHP shrugs off these concerns.
Reasons for Increased Production
BHP said that it had experienced a remarkable increase in its’ operating conditions from its activities based in Western Australia. The ore handling equipment at Yandi was refurbished, the miner’s rail infrastructure was dual trucked and the major improvements were done atPort Hedland to increase its ship loading capacity were thought to be the reasons which attributed to the increase in the production rates.
“Full year production is now forecast to marginally exceed prior guidance of 159 million tonnes per annum,” as reported for the quarterly statement ending 31 December 2011.
Demand Prospects
China, the world’s second largest economy, is considered to be the biggest market for the iron ore. An economic report produced this week indicates that the Chinese economy grew at its slowest rate in two and half years in the fourth quarter. This gave signs for a sharper slowdown in the coming months and raised concerns over the demand for the steel-making commodity from the Chinese industries.
However, in spite of the projected slowdown of the Chinese economy, there is optimism of increased demand of iron ore in the country. In addition to a modern-day industrial revolution currently in progress in China, over 100 million rural Chinese are expected to move to towns and cities in the coming years, and this will raise the demand for steel required for housing and infrastructure.
“These companies are pretty ‘gung ho’ on iron ore and I don’t think they would be out there crazily expanding if they thought there was a chance the volumes might not find a home,” saidMark Taylor an analyst for Morningstar in Sydney.
BHP rose by 13 percent to close at 2120.5 in London trading as at 3:21 P.M.
Company Spotlight
BHP Billiton is the largest mining company in the world. The company mines copper, gold, iron, copper, and coal, and has proved oil reserves.
References|
↑ ADVFN News
↑ Business Day
↑ Mining Weekly
↑ BBC News
↑ BHP Billiton Business
