BHP’s Second-Quarter Iron Ore Gains 4% to Record

Jan. 20 （Bloomberg） -- BHP Billiton Ltd., the world’s largest mining company, said second-quarter iron ore production rose 4 percent to a record, while coking coal output fell in Australia because of record rains and floods.

Ore output was 33.7 million metric tons in the three months ended Dec. 31, from 32.5 million tons a year earlier, Melbourne- based BHP said in a statement. Coking coal output in Queensland state fell 30 percent from the first-quarter because of rain and floods, the company said. This drop matched a UBS AG forecast

Robust growth in developing economies remains the primary driver of commodity demand, BHP said today. The company, the world’s third-largest producer of iron ore, wants to double production of the commodity used to make steel to 240 million tons a year by 2013 to meet Chinese demand.

“The bulk of their earnings comes from iron ore and the result looks good and beat expectations, ” said Chris Weston, an institutional dealer at IG Markets Ltd. in Melbourne. “Analysts were expecting to see those sorts of numbers” for the decline in coking coal production, he said.

BHP fell 1.4 percent to A$45.40 at 10:00 a.m. Sydney time on the Australian stock exchange. The stock has gained 20 percent in the last six months.

“Further positive signs are emerging in the United States following the Federal Reserve’s ongoing efforts to stimulate the economy,” BHP said in the statement. “When coupled with supply side constraint, which has been further exacerbated by weather related disruptions in countries such as Australia, Colombia and South Africa, BHP Billiton remains confident in the fundamentals for its core products.”

Rapid Growth

Sales of iron ore contributed 21 percent of BHP’s revenue in the year ended June 30, according to data compiled by Bloomberg. BHP is spending $4.8 billion on the fifth part of the so-called Rapid Growth Projects that will add 50 million tons.

Total production of coking coal, used to make steel, fell 12 percent in the quarter from a year earlier because of the heavy rain. Months of rain in Queensland caused flooding that swamped mines and closed railway lines, curbing supply.

“When combined with disruption to external infrastructure, we expect an ongoing impact on production, sales and unit costs for the remainder of the 2011 financial year,” BHP said. The coking coal unit was BHP’s fourth-largest earner last year.

Flood Cost

The floods may have cost the coal industry A$2.3 billion （$2.3 billion） in lost sales, the Queensland Resources Council said this week. About 15 percent of the state’s 57 coal mines are operating at full production, 60 percent have restrictions and 25 percent have yet to resume output, it said.

BHP’s energy coal output was 16.5 million tons, up 7 percent after it started output at the MAC20 project in the Hunter Valley in Australia’s New South Wales state. Copper output gained 11 percent to 302,300 metric tons.

Total petroleum production fell 4 percent to 37.25 million barrels of oil equivalent.

Steel consumption may jump 5.3 percent this year to a record, according to forecasts from the World Steel Association. The spot price of ore shipped to China gained 21 percent in the quarter and 43 percent over 2010, according to The Steel Index.

“Hopefully we will keep seeing BHP’s growth come out of iron ore,” said IG’s Weston. “This should play out into a strong first half of earnings.”