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BHP Billiton upbeat on commodities outlook

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Sydney, Australia — MININGREVIEW.COM — 20 January 2010 – BHP Billiton “’ a global leader in the resources industry and the world’s largest miner “’ has given its most upbeat outlook for commodities since the global downturn, reporting record iron ore shipments and setting the stage for higher metal prices in 2010.

In a statement released here the company highlighted hefty price recoveries across key commodities from iron ore and copper to aluminium and nickel in the December quarter, led by strong sales to China, as well as inventory rebuilding in developed economies.

It added a note of caution, however, saying commodity prices could remain volatile in the near term as rich economies withdrew stimulus funding, but analysts called it a strong showing, underlining their forecasts for a further run-up in prices.

“It’s an impressive production scorecard,” Bank of America Merrill Lynch said in a client note.

BHP Billiton’s production of iron ore “’ the main material used to manufacture steel “’ leapt 11% in the quarter from a year earlier, mirroring strong production data from rivals Rio Tinto and Vale. BHP Billiton is third-largest of the three major producers.

Reuters reports that the surging demand for iron ore, especially from China, is encouraging producers to make more sales onto the spot market, where buyers are willing to pay twice the price paid under the traditional long-term contracts. Contract iron ore prices under negotiation with steel mills are forecast by analysts to rise by as much as 40% this year.

The company reports that copper output, as expected, fell 11% in the December quarter after an accident at BHP’s Olympic Dam mine in Australia. The mine lost 20 000 tonnes production in the December quarter. Industrial action at the company’s Spence mine in Chile cut production by a further 28 000 tonnes. It adds that copper prices have risen over 130 percent in the last year.

BHP adds that nickel production rose 20%, owing to a stronger output at its Australian mines, lifting its exposure to rising prices in the sector despite a growing global supply surplus. Coking and thermal coal and uranium each showed marginal year-on-year declines.

“All in all, Rio packed a bigger punch but came from a lower base than BHP, which weathered the global financial crisis a lot better," said DJ Carmichael & Co mining analyst James Wilson.