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BHP Billiton reconsiders iron ore expansion

The race to the top just got a little slower forBHP Billiton. The Anglo-Australian company announced on Wednesday it will put the brakes on its planned ...

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|Apr 24|magazine5 min read

The race to the top just got a little slower for BHP Billiton. The Anglo-Australian company announced on Wednesday it will put the brakes on its planned expansion in iron ore production in favor of conserving cash as commodity prices continue to deteriorate.

The company said deferring capital spending at its inner harbor infrastructure at Port Hedland would enable its proposed 290 million-ton-per-year expansion to be done at a lower capital cost.

“Our focus remains on producing at the lowest possible cost, with Western Australia iron ore unit costs now below US$20 per ton, as we continue to improve productivity,” said Andrew Mackenzie, BHP chief executive.

BHP’s decision to hold off comes at a critical time as rival miners increasingly plead for BHP, Rio Tinto and Vale to cap their production in an effort to stabilize iron ore prices.

• Iron Ore: Rio Tinto Has No Plans to Slow Down

Andrew Hodge, analyst at Wood Mackenzie, said: “BHP’s message is that it wants to conserve capital and it is about value rather than volume.” He added: “Taking some tons out of the market may have a positive impact on prices.”

On Wednesday, forecast for the amount of iron ore BHP plans to produce in the year to the end of June increased to 230 million tons, a 13 percent rise in the company’s guidance from the previous 12 months.

According to Australia & New Zealand Banking Group Ltd. and Pacific Investment Management Co., a floor in prices may now be forming.

Surprisingly enough, prices for iron ore rose 5.5 percent to $57.81 per a ton on Friday.