SYDNEY (Reuters) - Rio Tinto (RIO.AX) (RIO.L) and BHP Billiton (BHP.AX) (BLT.L) are set to report lower-than-expected iron ore output for the March quarter after heavy rains and cyclones disrupted port and mining operations in Australia.
The losses could collectively reach as high as 4 million metric tonnes of ore - some 4 percent of overall estimated output for the quarter.
The shortfall, evident in shipping statistics, has been helping shore up seaborne-traded iron ore prices despite slowing demand from China, the biggest buyer of Australian ore.
“Less supply, not more demand, is keeping prices up,” said a bulk commodities trader based in Australia, who sells ore mined in Australia and India based on the daily spot market.
Benchmark iron ore with 62 percent iron content .IO62-CNI=SI stood at $148.70 a tonne, according to Steel Index, the highest price since October 18.
BHP’s outgoing iron ore chief, Ian Ashby, in late March warned of “flattening” iron ore demand growth from China, sending mining shares tumbling and knocking the Australian dollar.
But at least for now, the world no. 3 producer intends to push ahead with a $10 billion plan to expand production.
That should result in a strong upturn in output in the current quarter, traditionally robust due to improving weather across the Pilbara iron belt in Western Australia.
Expansion work by Rio Tinto to progressively take annual output to 283 million tonnes by the second half of 2013 from 230 million now is also on schedule.
Heavy rains and two early-season cyclones that drenched Rio Tinto’s Paraburdoo mines and BHP’s Mt Newman pits early in the last quarter coupled with high sea swells generated by Cyclone Lua in late March at the ports of Dampier, Cape Lambert and Port Hedland, cost Rio Tinto and BHP around 2 million metric tonnes in lost shipments each, analysts estimate.
Rio Tinto, the world’s second-biggest miner of iron ore after Vale (VALE5.SA) of Brazil, will post its quarterly production report on April 17. BHP reports on April 18.
CLSA Asia Pacific Markets analyst Hayden Bairstow trimmed by 3.8 percent his quarterly production forecast for Rio Tinto to 55.3 million tonnes and cut BHP’s forecast by 5.2 percent to 38.6 million tonnes.
Iron ore shipments through Australia’s Port Hedland, used by BHP and smaller producers Fortescue Metals (FMG.AX) and Atlas Iron (AGO.AX), dropped to 18.66 million tonnes in March from 19.58 million in February, according to port authority data.
In January and February, exports from Port Hedland averaged only 18.5 million tonnes per month against 20.3 million tonnes in the December quarter.
In coal, BHP in particular, will see a shortfall this quarter following a second summer of heavy rainfall at its Bowen Basin collieries in eastern Australia and ongoing labor disputes.
Credit Suisse forecasts a 10 percent drop in metallurgical coal output by BHP in the March quarter to 7.625 million tonnes versus the previous quarter, though up by 14 percent compared to the same period a year ago.
Shipments via the Hay Point coal terminal, owned and operated by a joint venture between BHP and Japan’s Mitsubishi Corp (8058.T), fell 25 percent in March alone to 1.89 million tonnes, according to port data.
In total, seven mines operated under the partnership have an output capacity of more than 58 million tonnes a year, representing about a fifth of annual global trade in metallurgical coal, but are unlikely to approach that level in fiscal 2012.
BHP on Wednesday said it was ceasing production from one of the mines, Norwich Park, citing low output and high costs amid soft coal prices and labor unrest [ID:nL3E8FB24Y]. This will result in the loss of some 370,000 tonnes of coal per quarter, based on average quarterly output over the last three quarters.
A week earlier, the partners declared force majeure on deliveries from the Bowen Basin mines due to the union strikes compounded by weather-related disruptions.
Coking coal prices have recoiled to around $206 a metric tonne for deliveries in the current quarter from $235 in the March 2012 quarter and $315 in the third quarter of 2011.
BHP was more exposed to production problems at its Australian collieries than Rio Tinto, whose losses were not as severe and focused on less supply-sensitive thermal coals used in power generation.
Editing by Ed Davies