* BHP, Fortescue, Rio squeeze mines for more iron ore
* BHP lifts full-year iron ore guidance by 5 million tonnes
* Says heavy rains over last quarter had little impact
* March quarter iron ore output up 1 pct vs Dec quarter
(Adds price forecasts, Fortescue CEO quotes, link to tables)
By James Regan
SYDNEY, April 16 Australian miners are racing
ahead with plans to expand iron ore production to capture more
of the Chinese market for the steelmaking ingredient, amid
strong competition from the world's biggest supplier Vale
Efforts to beat already ambitious output targets comes as a
crackdown in China on using commodities as collateral to raise
cash risks unleashing iron ore sales from tens of millions of
tonnes sitting in Chinese port warehouses, pressuring prices.
Fortescue Metals Group Ltd, which is raising
production 57 percent this year, says its needs iron ore prices
to stay between $110-$120 a tonne for the next 12-18 months in
order to pay off a targeted $2.5 billion in debt.
The Australian Bureau of Resources and Energy Economics
forecast an average price of $110 a tonne this year but only
$103 a tonne in 2015. By 2016, Citigroup sees the price falling
Iron ore was quoted at $117.10 .IO62-CNI=SI on Wednesday.
BHP, the world's biggest diversified mining company, on
Wednesday lifted full-year iron ore production guidance by 5
million tonnes to 217 million as it pushes ahead with new mine
work in Australia.
That's still behind Australian rival, Rio Tinto
, which is close to mining 300 million tonnes a
year and Vale, which is targeting annual output of more than 360
million tonnes, with longer term plans to exceed 400 million.
China imports more than a half-billion tonnes of iron ore
annually to supplement domestic production of mostly lower-grade
ore. China's crude steel production rate of some 2 million tonne
a day makes it by far the world's biggest consumer of iron ore.
Output from BHP's most profitable division rose 1 pct to 49.6
million tonnes in the three months ended March 31 versus the
previous quarter -- above forecasts, according to Macquarie
Against the same quarter last year, output was up 23
percent, data from BHP's quarterly production report showed.
BHP Chief Executive Andrew Mackenzie said the lift in output
was helped by a limited impact from heavy rains in Australia's
Pilbara iron ore belt in January and expansion work underway at
the company's new Jimblebar mine.
Rio Tinto this week blamed an 8 percent fall in quarterly
iron ore shipments on rains and winds from cyclone Christine
that disrupted its transport and shipping operations.
That is unlikely to occur again in the current quarter, one
of the driest each year in the Pilbara.
Fortescue Chief Executive Nev Power has set a target of
producing 41.6 million tonnes in the current quarter, 10.1
million tonnes up on the previous quarter, the vast majority for
sale to Chinese steel mills.
He said any release of stockpiled iron ore in China would
act as a short-term weight on prices, at best, given the
country's rapacious appetite for imported ore.
"While there might be some short-term volatility in the
price from a major release from the port stocks, it's not going
to last very long," Power told reporters on a conference call,
noting that 30 million tonnes represented only about seven or
eight days consumption in China.
Commodities such as copper and rubber have been commonly
used for financing, where traders or investors borrow against
the commodity with the aim of investing the money in high-return
areas such as real estate.
But Beijing's efforts to tighten credit have spurred
investors desperate for cash to turn to iron ore. Industry
sources familiar with the practice estimate some 30 million
tonnes, or $3.5 billion worth, of stocks are now tied up by
Vale is due to release first quarter production and
financial reports on April 30.
(Editing by Ed Davies)