Rio, BHP to report higher output

Rio Tinto and BHP Billiton are set to report solid iron ore output growth in the December quarter as they continue to expand mining in Australia, betting any loss in China's appetite for the steelmaking material is only temporary.

Both companies maintain that sales orders to China, the world's top buyer, are showing no signs of weakening despite a slowdown in Chinese steel production.

"Production and earnings are expected to highlight what remains a robust sector, even though economic uncertainties continue to drive near-term sentiment," brokerage Nomura said in a note.

Analysts expect Rio to show a rise of more than 25 percent in iron ore output over the previous quarter when it reports December-quarter production data today.

And BHP's December-quarter iron ore yield could be up as much as 23 percent when it is reported tomorrow, they said.

Coal output from Australia - the largest source of steel-making coal and also a big supplier of thermal grades for power generation - remained under par because of flooding in early 2011 that left transport lines and some collieries under water.

Iron ore should show the biggest gains in the December quarter across both companies' diversified portfolios.

A record 60.9 million tons of iron ore was shipped in the December quarter through Australia's Port Hedland, where BHP is the biggest user. In December alone, the port's iron ore shipments climbed 23 percent to 21.4 million tons.

The No. 3 iron ore producer behind Brazil's Vale and Rio, BHP has already tipped the market to expect a total output of 159 million tons in 2011/12.

Rio expects calendar 2011 output at around 240 million tons, which most analysts forecast it will reach, given the strong December-quarter performance from its mines in Australia. Rio also operates a much smaller iron ore business in Canada.

Nomura expects BHP to produce 48.9 million tons of iron ore in the December quarter, up from 39.6 million in the previous quarter. It sees Rio's output at 64 million tons in the December quarter, versus 49.8 million tons previously.

Reuters