2017 iron ore output may be flat: BHP

MELBOURNE: BHP Billiton Ltd, the world’s biggest mining company, forecast that iron ore production could be flat this fiscal year, while it sees petroleum output declining as much as 17 per cent and the prices of its top earning materials remaining volatile.

Capital spending on oil assets will plunge 44 per cent to about $1.4 billion in the year, after petroleum output slumped 11 per cent to 56 million barrels of oil equivalent in the three months ended June 30, Melbourne-based BHP said on Wednesday in a statement. Iron ore production fell 7 per cent to 55.6 million metric tonnes in the quarter.

The Bloomberg Commodity Index of returns on 22 raw materials remains about 50 per cent from a 2011 peak as global economic growth struggles to rebound. Iron ore has slumped around 70 per cent from a record in 2011, while crude oil is more than 60 per cent lower than its 2012 top, prompting BHP in February to book pretax impairments of $7.2 billion against its US shale assets.

“The whole thrust of their strategy is to batten down the hatches to some extent, to limit capital expenditure and to not do anything too adventurous that would be dependent on major price increases from current levels,” Ric Spooner, Chief Market Strategist at CMC Markets Asia Pty, said by phone from Sydney. “It’s about grinding things out in what’s a tough environment.”

BHP shares slumped 2.9 per cent to A$19.25 in Sydney, trimming its advance this year to 7.8 per cent.

The company said it expects to record additional one-time charges of as much as $175 million against fullyear earnings related to inventory write downs, redundancies and impairments in its coal businesses.

Full-year petroleum production is forecast to decline to between 200 million and 210 million barrels of oil equivalent in the current fiscal year, from 240 million barrels this fiscal year after BHP cut rigs in its US shale division to preserve cash. Iron ore output may remain flat or advance by as much as 4 per cent to between 228 million tonnes to 237 million tonnes in fiscal 2017, it said.