The Australian (sub required) reports BHP Billiton iron ore president Jimmy Wilson – who took the job only last month – has "told thousands of his staff" that the global resources giant is reviewing its expansion plans in the Pilbara, the heart of the country's iron ore operations.
BHP is on track to increase Pilbara iron ore production from about 160 miliion tonnes to 240 million tonnes over the next few years, but according to the memo the construction of a $20 billion outer harbour at Port Hedland could now be postponed for at least two years, drawing a line under future growth.
Later on Thursday BHP responded to the claims by telling Reuters that although the company is reviewing future growth projects in the current environment Wilson "did not say anything about Outer Harbour approvals and the fact remains that no decision has been made on the project."
On Thursday the benchmark import price of 62% iron ore fines at China's Tianjin port recovered slightly to $117.10 a tonne, but the steelmaking ingredient is trading well below the $175 a tonne it changed hands for this time last year and analysts believe a sustained move below $120 indicates a fundamental shift in the industry.
BHP (ASX,LON,NYSE:BHP) stock is languishing at 3 1/2-year lows despite logging a remarkable production performance over the past twelve months.
The performance of iron ore was especially strong, with BHP well on its way to reporting a 12th consecutive record for annual iron ore production following total output in the past fiscal year of 179 million tonnes.
The company is also scaling back or postponing other expensive expansion projects including Olympic Dam uranium-copper-gold, Escondida copper where it partners with Rio Tinto and the brownfields Jansen potash project in Canada, but the pullback in iron ore – by far the Melbourne-based company's most profitable division – is a surprising move and indicative of the cloudy outlook for the commodities business.