BHP Billiton (ASX:BHP), the world’s largest mining company, has decided to put the brakes on its planned boost to iron ore production, becoming the first top miner to act on the matter of global supply glut that has sent prices for the commodity plummeting.
Delivering an operational review for the nine months ended in March 31, BHP announced it was deferring spending at its main port in Western Australia, which would have increased the miner’s output by 20 million tonnes.
The move will slow BHP’s planned production boost to 290 million tonnes a year by mid-2017, but would enable its proposed 20 million-tonne-a-year expansion to be done at lower costs.
“Our focus remains on producing at the lowest possible cost, with Western Australia iron ore unit costs now below US$20 per tonne, as we continue to improve productivity,” said BHP chief executive, Andrew Mackenzie.
Despite the announcement, BHP said it produced 59 million tonnes of iron ore in the three months through March, up one-fifth on the same period a year earlier and 5% on the quarter immediately prior. As a result, the company lifted its output forecast for the year through June, saying it now expects to log a 230-million tonnes output, 2% more than projected earlier.
BHP’s announcement comes just a day after rival Rio Tinto (LON, ASX:RIO) said it would have to fast-track production in the coming months to compensate for weaker-than-expected shipments in the same quarter through March.