* Rio Tinto, BHP, Fortescue turn up iron ore output
* Production going up as iron ore price heads down
* Miners show no signs of backing off expansion plans
By James Regan
SYDNEY, Jan 15 Australian miners shoveled record
tonnages of iron ore in the December quarter, supported by
billions of dollars worth of expansion plans coming on stream
and despite signs of weakening demand from top consumer China.
Iron ore continues to generate big returns even as prices
fall, and miners in Australia - the world's biggest supplier -
are counting on economies of scale to maintain profits for the
steel making material.
Production data from Rio Tinto, BHP Billiton
and Fortescue Metals Group will be released
over the next two weeks, but port data already shows record
tonnages were shipped in the last quarter even as Chinese demand
Chinese iron ore purchases fell 5.6 percent to 73.4 million
tonnes in December, down from a record 77.8 million in November
and ore prices have dipped to a six-month low.
And weaker steel prices have prompted some mills to reduce
production, putting China's average daily crude steel output at
1.961 million tonnes in late December, the first time the pace
fell below 2 million tonnes since last February.
But Australian iron ore mining seems immune from the
spending crunch afflicting other commodities as a slowdown in
Chinese growth cools a decade-long mining boom.
Rio Tinto kicks off the quarterly production
reporting season on Thursday with output likely to hit nearly 70
million tonnes, keeping its full-year target of 265 million
tonnes in sight.
That would secure Rio Tinto's ranking in global production
behind leader Vale of Brazil, which is forecasting
2013 ore production of 306 million tonnes.
By the second quarter of 2014, Rio Tinto is scheduled to be
operating at a yearly run rate of 290 million tonnes before
progressively rising to 360 million in 2017.
"So much of the revenue generated by the big mining
companies comes from iron ore, it makes sense to build on
economies of scale," said Keith Goode, an analyst at Eagle
Data from Australia's Port Hedland, which handles about a
fifth of the global seaborne iron ore market, indicate BHP
Billiton and Fortescue also had a bumper three months.
Iron ore shipments from Port Hedland rose 4.2 percent to
86.5 million tonnes in the December quarter from 83 million in
the previous quarter. Shipments in December hit a one-month
record of 29.5 million tonnes.
UBS is forecasting a 1 percent lift in BHP's iron ore output
for the quarter when it reports on Jan. 22, but said the speed
by which its newest Jimblebar mine was building to 35 million
tonnes a year would determine ultimate production for the
Fortescue is on track to show a 10-15 percent
quarter-on-quarter rise in shipments to China, when it reports
on Jan 30 after commissioning new mine work in 2013.
"This is a pivotal year for Fortescue as we near the
completion of our expansion," Chief Executive Nev Power said
after announcing a $1.6 billion repayment of unsecured notes.
Fortescue is aiming to repay between $4 billion and $5
billion before setting up its next phase of growth in iron ore
production beyond an annualised rate of 155 million tonnes.
Rio Tinto, BHP and Fortescue each mine ore at costs well
below selling prices - thanks to a combination of rich grades
and high volumes - and see any dip in prices as weeding out less
That will become increasingly important if iron ore prices
continue on their downward trend.
Iron ore prices fell 1.1 percent to $129.50 a
tonne on Tuesday, the cheapest since July 16, according to data
from compiler Steel Index.