BHP Billiton Plans Continued Iron Ore Growth, Cost Reductions
“We now expect to increase WAIO mine capacity to 275 million mt/y without the need for additional fixed plant investment. Beyond that, the Inner Harbour Debottlenecking and Jimblebar Phase 2 projects will help us to reach 290 million mt/y of supply chain capacity at low capital cost,” Wilson said. WAIO’s ore reserves are concentrated around four major mining hubs: Mount Newman, Yandi, Mount Goldsworthy and Jimblebar. The hubs are located in relatively close proximity to each other and are served by the 325-km, dual-track Port Hedland/ Newman Railway.
“We have the strongest resource position in Western Australia, and the quality of our ore bodies will help us sustain strong margins over the long term,” Wilson said. “We have already significantly cut the cost of production at WAIO and plan to go further...With annual sustaining capex of approximately $5/mt over the next five years, we aim to be the lowest-cost supplier to China on an all-in cash basis.”
Wilson also outlined BHP Billiton’s view of supply and demand trends in the iron ore market. “We continue to see healthy demand growth for iron ore in the mid-term as Chinese steel production is expected to increase by approximately 25% to between 1 billion and 1.1 billion mt in the early to mid- 2020s. Meanwhile, steel production growth in other emerging economies is outpacing China as those nations urbanize and industrialize. We expect to see a compound annual growth rate for global steel production of 2.5% and 3% between now and 2030.
“Unsurprisingly, high prices over the last decade created the incentives needed for new entrants to join the market and traditional producers to substantially increase supply. As a result, growth in seaborne supply is expected to exceed growth in demand over the short to medium term,” Wilson said.
The spot price for iron ore peaked at more than $180/mt in early 2011 and has since dropped to around $80/mt. Ongoing expansions of production by the three dominant iron ore mining companies—Vale, Rio Tinto and BHP Billiton—will likely continue to suppress prices for some time to come.