* China iron ore demand growth seen falling to single digits
* BHP sticks to $10 bln iron ore expansion plans
* Rio to lift Australia iron ore output to 283 mln T by 2013
* BHP mining iron ore at rate of 165 mln-170 mln T/yr
* BHP sees current floor for ore price at $120/T
* Comments knock Aussie dlr, BHP stock dips
By James Regan and Rebekah Kebede
PERTH, March 20 Australian iron ore miners, key
beneficiaries of China's modern-day industrial revolution, on
Tuesday signaled demand growth was finally slowing in response
to Beijing's moves to cool its economy.
It was the strongest indication yet from an industry closest
to China's phenomenal industrial growth over the last decade
that the boom times, if not over, are tempering.
China has drawn iron ore from all over the world to feed its
steel mills, offsetting a paltry home endowment of ore, but
nowhere as much as Australia, where output has gone from 80
million tonnes a decade ago to nearly 500 million tonnes now.
BHP Billiton, the world's biggest miner, said it
was seeing signs of "flattening" iron ore demand from China,
though for now it was pushing ahead with ambitious plans to
expand production even further.
Rival Rio Tinto said it too was sticking with
plans to lift capacity from its mines in Western Australia's
Pilbara iron ore belt, betting on a soft landing for the Chinese
"The (Chinese) economy is shifting, it's changing. Steel
growth rates will flatten and they have flattened," Ian Ashby,
president of BHP's iron ore division, said ahead of the Global
Iron Ore & Steel Forecast Conference in Perth.
China's demand for iron ore, a key steelmaking ingredient,
will slow to single digit growth, but the country's annual steel
output will still rise by some 60 percent by 2025, Ashby said.
The news knocked the Australian dollar down 1
percent and weighed on stocks in Asia and Europe. Markets are
very sensitive to any hint of softening demand in China, given
it is Australia's single biggest export market.
China's iron ore imports have grown at a double-digit rate
for the last eight years, apart from a 1.4 percent drop in 2010
amid the global financial crisis, according to data from Reuters
and China customs.
Chinese demand for iron ore has been the driving force
behind years of expansion work by the world's biggest miners.
More than 100 million rural Chinese are projected to settle in
towns and cities in the next decade, requiring vast amounts of
steel for housing and infrastructure.
Earlier this month, however, China cut its 2012 growth
target to an eight-year low of 7.5 percent, fuelling caution
about demand for natural resources.
The miners stopped well short of declaring an end to China's
commodities boom, but dimmed their outlooks.
Rio, BHP and other miners have been pursuing a strategy of
running at full production and expanding capacity in long-life
and relatively low-cost commodity assets compared to the selling
price of ore, banking on squeezing out higher cost producers.
"When the industry shakes out, you need to be on the left
hand (lower) side of the cost curve," BHP's Ashby said.
BHP was sticking with its $10 billion iron ore expansion
plan and was mining ore at a rate of 165 million to 170 million
tonnes per year, Ashby said.
That is above its production guidance of 159 million tonnes
in fiscal 2012 ending June 30, maintaining the company's No.3
global ranking in iron ore behind Vale and Rio Tinto.
"The size of the pie is really big, so any percentage
increase is a significant number," Ashby said.
Analysts agreed even single-digit growth in Chinese ore
demand should be enough to spur miners to push ahead with
production expansion plans.
"Certainly the rate of growth in Chinese demand is slowing,
but the growth is from an ever increasing base so the number of
iron units required continues to rise," said Paul Gray, analyst
at Wood Mackenzie, who sees the seaborne iron ore market staying
tight through 2012 and 2013.
Rio was also sanguine about the slowing growth.
"Although the rate of GDP growth in China is more
immediately slowing, we remain confident, on the basis of the
figures we have seen, of a soft landing, with solid growth for
this year," David Joyce, Rio Tinto's managing director of
expansion projects, said in a speech.
Imported iron ore inventories are in decline at major ports
in China after exceeding 100 million tonnes in early February,
consistent with a rebound of the steel market, according to
Australia & New Zealand Bank's Nicholas Zhu.
"High levels of stock have been a concern since last
November when the steel market entered a period of slow
activity," Zhu said in a client note.
BHP saw the current floor for global iron ore prices at $120
a tonne, based on the estimated highest cost of production
inside China, Ashby said.
Iron ore has sold for between $130 and $147 a tonne over the
last four months, which mega-producers such as Rio Tinto have
said is high enough to warrant investment in new mines.
Rio has mapped out plans to lift annual production of iron
ore in Australia to 283 million tonnes in 2013 from 225 million
now by digging new mines and expanding existing ones.
Rio Tinto Chief Executive Tom Albanese told the company's
annual meeting last month it would stage expansion work with
Global iron ore demand is set to double to around 3.5
billion tonnes a year by 2030, with Chinese appetite for ore
material continuing to drive the market, albeit at a slower
pace, according to Perth-based Intierra Resource Intelligence.
BHP shares eased 0.1 percent in Australian trade, but its
London listing fell more than 2 percent in early trade.