BHP iron ore output rises 11% in Q2

Global miner BHP Billiton Ltd has posted an 11 per cent increase in iron ore output for the December quarter.

The company set a quarterly and half-year record for iron ore production and shipments, with output totalling 32.45 million tonnes in the second quarter, up 11 per cent on the same quarter in fiscal 2009.

Iron ore production for the half-year totalled 62.55 million tonnes.

Total petroleum production rose 16 per cent, compared with the previous comparative quarter, while aluminium output rose one per cent and nickel production climbed 20 per cent.

BHP said commodities prices posted a strong recovery in the December quarter, driven by demand in China and restocking in the developed world.

"Government stimulus measures appear to have supported a gradual return to normalised global trade, albeit from a low base, and most key indicators across the developed economies showed improvement," the company said in a statement to the Australian Securities Exchange (ASX).

However, BHP said some volatility was expected in the short-term outlook, given uncertainty over the global economic recovery.

"Going forward the speed of recovery in the developed economies remains uncertain, particularly considering the eventual withdrawal of government stimulus," the miner said.

"In China the impact of measures to control loan growth will add another future variable.

"Consequently we expect some degree of volatility in the short term outlook for our commodities."

BHP said iron ore production was boosted by rail and port infrastructure improvements.

In total, 54 per cent of its WA iron ore shipments on a wet metric tonne basis were based on annually agreed pricing, with the remainder sold on shorter term reference pricing.

Iron ore prices under negotiation with steel mills are forecast by analysts to rise by as much as 40 per cent this year after recoiling in the 2010 financial year as steel-makers turn up production and miners struggle to keep pace. Spot market prices are already running at almost twice the annual benchmark price.

Petroleum output totalled 38.36 million barrels of oil equivalent (boe) in the December quarter, and a record 79.57 million boe for the half year.

A ramp-up of the company's Shenzi (USA) operations, strong reservoir performance from Atlantis and no weather related interruptions boosted output for the half, BHP said, although lower seasonal demand in eastern Australia and planned downtime at its Gulf of Mexico non-operated assets impacted production in the final quarter.

Nickel production rose 20 per cent to 49,000 tonnes, due to a record performance at the miner's Nickel West operations.

Copper production fell 12 per cent on a comparative quarter basis, to 271,100 tonnes, due to the Clark Shaft outage at Olympic Dam, which cut output by about 20,000 tonnes.

Industrial action at BHP's Spence mine in Chile also led to a 28,000 tonne reduction in output.

Both events were partially offset by stronger production at the miner's Escondida operations and the return of the Laguna Seca SAG mill to full operation.

Copper prices have risen over 130 per cent in the last year and some analysts are projecting a supply deficit later in 2010, aggravated by the production shortfall at Olympic Dam.

Output of metallurgical coal, used in steel-making, was down 12 per cent.

Aluminium production rose one per cent to 313,000 tonnes.

At 1219 AEDT, shares in BHP were trading 1.13 per cent higher at $43.80, against a 0.74 per cent rise in the benchmark index.