(Adds CEO comments, context, background)
By David Stanway
BEIJING, June 5 BHP Billiton
expanded iron ore production too rapidly, causing the
Anglo-Australian miner to overlook the underlying growth of its
overall business, its chief executive said on Thursday.
However, Andrew Mackenzie said that despite the iron ore
market facing temporary overcapacity, there was enough demand
coming back from China and elsewhere to justify the firm's
"We don't quite see the case for the scale of investment we
saw in last 10 years ... But the base business we built is going
to be a strong bedrock for decades to come," Mackenzie told
reporters in Beijing.
Global miners, including BHP, Anglo-Australian rival Rio
Tinto and Brazil's Vale, have all
banked on a sustained increase in iron ore demand from China,
ramping up capacity and boosting available seaborne supplies.
But a slowdown in China's economic growth to its weakest in
23 years, which has coincided with a surge in new iron ore
supplies, has sparked warnings of a global oversupply and
long-term depressed prices.
BHP, the world's third-biggest producer of the steelmaking
raw material behind Vale and Rio Tinto, is on track to raise its
total annual production to 260-270 million tonnes, up from a
planned 217 million tonnes in 2014.
While the glut has caused iron ore prices to drop nearly 30
percent this year to their lowest since September 2012,
Mackenzie said BHP's low production costs would make it easier
for the firm to weather any downturn.
"We are very strongly competitive at prices much lower than
today's prices," he said.
On China, the world's top iron ore consumer, Mackenzie said
a crackdown on pollution has forced local steel mills to turn to
higher quality material from Australia at the expense of
poorer-grade supplies from domestic mines and elsewhere.
Chinese imports of iron ore have surged 20.65 percent in the
first four months of the year to 305.3 million tonnes, and
Australian producers have been the main beneficiary, with
shipments up 35.4 percent.
Australia's share of China's total imports rose to 54
percent over the period, up from 50.9 percent for the whole of
As China's economy shifts away from an investment-led
expansion, Mackenzie said BHP was looking at new areas to
benefit from the changes, such as growing its potash and energy
BHP is still looking to simplify its portfolio by selling
some assets and has no plans for acquisitions, Mackenzie said,
adding it was still looking to sell its Nickel West asset in
Australia, which analysts at Deutsche Bank have valued at $459
The company has lumped Nickel West with two other unwanted
businesses, aluminium and manganese, and flagged earlier this
year that one option would be to spin off all three into a
(Reporting by David Stanway; Editing by Mark Potter)