BHP Billiton confident despite softening demand

BHP Billiton is confident the industrialisation of China will continue to drive demand for its products, but says there will be volatility and uncertainty in the short term as global growth slows. The world's largest mining company recorded a "solid performance" in the first quarter of its financial year, delivering production rises in the key commodities of iron ore and petroleum, despite a challenging supply environment. "China has not been immune to the global slowdown," BHP Billiton (bhp.ASX:Quote,News) said. "We expect volatility and uncertainty to continue in the short term. "Notwithstanding this short term uncertainty, we remain confident that the ongoing industrialisation and urbanisation of China and other developing economies will continue to drive strong longer term demand for our products." Rival Rio Tinto (rio.ASX:Quote,News) last week said demand for steel-making raw materials, copper and aluminium had slowed and warned that any bounce in Chinese demand would be delayed until next year. Shares in BHP Billiton, which is pursuing Rio Tinto with a $US76 billion ($107.85 billion) takeover offer, dropped $1.21, or 4.13 per cent to $28.10 by 10.32am (AEDT). Rio Tinto lost $1.28, or 1.72 per cent to $73.08. BHP Billiton shares have dropped about 43.3 per cent and Rio Tinto has lost 53.2 per cent since both companies hit 12-month closing highs on May 19 of $49.55 and $156.10, respectively. The share prices of resource stocks have plunged on the Australian share market amid expectations that financial market turmoil will spark a global recession and reduce demand for commodities. BHP Billiton's iron ore output during the three months to September 30 rose 15 per cent to 29.82 million tonnes, from the previous corresponding quarter, after it expanded projects in Western Australia. Petroleum output increased by 15 per cent to 34.8 million barrels of oil equivalent (mmboe) helped by newly commissioned projects, despite the impact of two hurricanes in the Gulf of Mexico. Copper output was flat at 308,900 tonnes, with lower production at the Escondida mine in Chile offsetting an improved performance at Olympic Dam in South Australia. BHP Billiton says copper output at Escondida is estimated to be about 10 per cent lower in fiscal 2009. Nickel output dropped by 31 per cent to 26,800 tonnes, following a major furnace rebuild at the Kalgoorlie Nickel Smelter in WA and maintenance at the Yabulu refinery in Queensland. Production of metallurgical coal, used in steelmaking, dropped by 4 per cent to 9.21 million tonnes as the company recovers from flooding at the start of the year. Aluminium output declined 8 per cent during the first quarter to 309,000 tonnes due to continuing power supply issues in South Africa, which has resulted in the partial shutdown of the Bayside smelter. Uranium production from Olympic Dam climbed 19 per cent to 1110 tonnes due to improved recoveries and a record amount of mined material. Manganese ore output was 27 per cent higher at 1830 tonnes after improved performance at GEMCO off the Northern Territory coast and Hotazel in South Africa. BHP Billiton said increased availability of rail and port capacity in South Africa also helped to increase manganese ore production. The company spent $US166 million ($235.56 million) on mineral exploration during the first quarter and $US148 million ($210.02 million) on petroleum exploration. ---news.com.au