* BHP iron ore chief calls union demands on pay & labour "unreasonable"
* Warns little room for stockpiling ore at Port Hedland
* Industrial action could hit mining activity if ports back up (Adds quotes from BHP iron ore chief and union)
By James Regan
SYDNEY, May 21 BHP Billiton said on Wednesday it may seek government intervention to avert industrial action by tugboat workers at the Port Hedland iron ore port that threatens to disrupt hundreds of millions of dollars in exports.
"It's highly likely we would do that," Jimmy Wilson, president of BHP's iron ore division, told reporters amid a long-running dispute between union workers and port services operator Teekay Shipping, which charges BHP a fee for operating tug services.
BHP also called the union's demands on pay and working conditions "unreasonable".
Australia's government has intervened in industrial disputes before. In 2011, the Fair Work Australia commission stepped in to end a long-running dispute between Qantas and three unions when the airline grounded its fleet, as the national carrier's move threatened damage to the country's economy.
The commission or the government could take similar action in face of a strike at Port Hedland.
Wilson said existing constraints on shipping from Port Hedland - the world's biggest export terminal for iron ore, accounting for about a fourth of worldwide sea-borne trade - meant little room existed for stockpiling ore while industrial action ground ship movement to a halt.
"Our stocks in the port are relatively large and that backs up in the system very quickly and conversely we have to stop our mining activities," he said. "We choke reasonably quickly."
BHP is the port's biggest user and earlier this year lifted its fiscal 2014 production target to 217 million tonnes.
Other port users, such as Fortescue Metals Group Ltd and Atlas Iron Ltd are increasing output and were also facing significant disruptions to their operations if industrial action is taken, according to Wilson.
BHP has already warned that a strike would cost $100 million in lost sales a day, based on exports running at around 1.1 million tonnes a day at a price of around $100 a tonne.
MORE PAY & LEAVE
Deckhands, engineers and masters of the tugboats that guide vessels in and out of the port are pressing Teekay Shipping for more pay and leave.
"We feel the demands are unreasonable," Wilson said.
Australian Maritime Officers Union industrial officer Robert Coombs said his union had already made concessions and would continue to negotiate for a resolution during conciliatory talks scheduled for June 5.
"It isn't our intention to place anyone's job in jeopardy or cause damage to the companies," Coombs said.
The deckhands have been the first to back strike action. The engineers, represented by the Australian Institute of Marine and Power Engineers, are voting on a plan to strike for up to two days, with the ballot result due on June 10. Tugboat captains, represented by the Australian Maritime Officers Union, hold a ballot due on May 30.
All crews work 28 days on, then get 28 days off. The deckhands want four weeks of leave on top of that and are pressing for pay equivalent to 70 percent of the A$220,000 that masters earn, up from A$135,000 a year.
Wilson said changes being sought by workers were onerous and set a "difficult precedent" in the Australian workplace.
"Giving into these demands is not going to be in the best interest of the country."
Iron ore is Australia's biggest export earner. The value of exports are forecast to climb 35 percent to A$76.8 billion ($71.17 billion)in the year to June 2014 from a year earlier, according to the Bureau of Resources and Energy Economics.
The dispute is running amid a slump in global iron ore prices to a 20-month low, which Wilson said was triggered by new supplies of iron ore outweighing growth in demand.
Demand for iron ore has grown by 60 million tonnes in the last year while supply is up by 120 million tonnes, Wilson said.
The new supply, much of it from Australia and Brazil, was knocking more higher cost Chinese iron ore production out of the market and lowering the overall production cost curve, he said.
The shift favours larger producers such as BHP, which can benefit from economies of scale by mining more ore. ($1 = 1.0790 Australian Dollars) (Editing by Muralikumar Anantharaman)