UPDATE 2-BHP says focus now is on cost cutting as markets slide

* BHP iron ore projects in pipeline to stay

* Rio Tinto trims staff office jobs due to worsening market conditions

By James Regan

SYDNEY, Aug 1 (Reuters) - The world's biggest mining firm BHP Billiton said on Wednesday it would focus on cutting costs, three weeks before it is expected to report its first drop in annual profits since the 2008 global financial crisis due to weakening commodity demand.

"Against a backdrop of increasing costs and falling commodity prices, we continue to focus on reducing our overheads, operating costs and non-essential expenditures to ensure our assets are well positioned on their relative cost curves," Fiona Martin, a BHP spokeswoman, said on Wednesday.

"This includes reviewing our overhead costs and the sequencing of our major projects."

The comments come amid mounting expectations that BHP will postpone one or more mega-projects it has proposed until economic outlooks in Europe and China improve.

Following a meeting on Wednesday with Colin Barnett, the premier of Western Australia state, where BHP this year shipped 159 million tonnes of iron ore and is spending billions of dollars on expansion work,

BHP Chief Executive Marius Kloppers told an Australian newspaper on Wednesday the company had not significantly changed its cautious view on global growth or its outlook for commodities since last year.

"I don't think our outlook has changed very much in the past six of seven months," Kloppers told the West Australian newspaper. "We signalled a note of caution through the latter part of last year."

"What we really look at is, where does the long-term demand take us? Our view on that hasn't really changed. There has been no real change in that long-term picture," he said.

Kloppers said BHP has about $30 billion of growth projects in the execution phase, while Martin added that expansion work to boost iron ore production by 5 percent in fiscal 2013 will continue as planned.

BHP ships the lion's share of its iron ore to steel mills in China, whose economy is growing at the slowest pace in more than three years.

BHP has yet to give the green light to the development of its Outer Harbour project in Western Australia, one of three huge projects in an $80 billion pipeline that BHP has slowed.

In February, BHP committed $779 million in preliminary funding ahead of a board review before signing off on the project, which would have an initial capacity to handle 100 million tonnes of ore a year.

BHP is tipped to report on Aug. 22 about a 22 percent decline in underlying earnings for fiscal 2012 to $16.990 billion, based on analysts estimates.

Benchmark international iron ore prices hit their lowest level in more than 2-1/2 years on Friday as the slowing Chinese economy cut global demand growth.

RIO TINTO

Rival Rio Tinto said on Wednesday that it is cutting staff in Australia and closing its Sydney office as it too battles falling commodity prices and threats to demand from Europe's debt crisis.

Around 30 support and services staff in Sydney and an undisclosed number of employees at the company's much larger operations in Melbourne would be cut, Rio Tinto's Australian manager David Peever told Reuters by telephone.

"We are undertaking a review of our support and services functions. There will be a reduction in the size of our Melbourne office and, yes, we do intend to close our Sydney office as well," Peever said from Paris.

"It's just making sure we are building in resilience in our business to deal with what is essentially a difficult time. We are seeing downturns in commodity prices, European circumstances are hovering over us, and we need to make sure we are very measured in terms of our approach to cost control," he said.

Rio's Melbourne headquarters employs around 240 staff while another 200 work from the suburb of Bundoora. Most of the downsizing would occur in the Melbourne office, Peever said.

Last month, Rio said it was cutting an unspecified number of jobs at its Clermont coal mine in Australia as it battles sliding thermal coal prices.

"I'm not aware of new ones (miner job cuts) since then," Peever said.