Clyde Russell is a Reuters market analyst. The views expressed are his own.
LAUNCESTON, Australia, Oct 23 (Reuters) – The latest production reports by Anglo-Australian mining giants BHP Billiton and Rio Tinto show just how much the commodity market has changed in the past year.
BHP and Rio’s quarterly statements underline that mining is now a game of producing the highest volumes at the lowest costs, while at the same time scaling back on spending.
This seems like a logical response to concerns over slowing demand growth from top consumer China, whose appetite for commodities drove a decade-long boom in developing projects to boost supply.
The jury is still out on whether the major resource companies stopped spending in time to avoid a major bust in commodity prices, or whether new supply still in the pipeline will deliver a crashing end to the China-led boom. Certainly both BHP and Rio made much of their efforts to boost volumes at lower costs, while scaling back capital expenditure.
This change in emphasis came about in the middle of last year when both companies abruptly changed direction from spending massively to boost supplies to curbing costs, selling non-core assets and running existing operations harder.
BHP, the world’s biggest mining company, said on Oct. 22 that iron ore output jumped 23 percent in its fiscal first quarter from the same period a year earlier.
The company also increased its forecast for full-year iron ore output by 2.4 percent to 212 million tonnes as it ramped up expansion projects in the state of Western Australia.
In doing so it joins Rio in boosting production of the steel-making ingredient, with the company on Oct. 15 reporting record quarterly output.
Rio, which gets two-thirds of its revenue from iron ore, said it is also on track to ramp up annual output to 290 million tonnes by the first half of 2014, and eventually to 360 million tonnes, at which point it would overtake current global leader Vale.
Rio boosted coal output to a record in the three months to September and said it was on track to increase copper production.
BHP also reported output gains in thermal and coking coal, copper, nickel and aluminium.
The increase in volumes was accompanied by cuts to spending, with Rio saying it would exceed its target of $750 million in 2013, having already achieved $729 million in the nine months to the end of September.
BHP said it is continuing to build on the $2.7 billion in savings achieved in the year to June 2013, “with strong momentum maintained” in the September quarter.
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