BHP Billiton to spend $1.3 bln on iron ore expansion

One (of several) bottlenecks to more steel at a better price is iron ore mining bottlenecks.


BHP Billiton said it will spend $1.3 billion to expand its iron ore output and rail and port capacity to keep up with soaring demand from Asian steel makers.

The board’s approval comes one day after Rio Tinto said it would spend $1.35 billion expanding its iron ore mine and port operations in Western Australia and Brazil’s Caemi Mineracao e Metalurgia approved a $760 million iron ore expansion.

BHP Billiton said it would start work immediately to nearly double iron ore production capacity to 42 million tonnes a year at its Area C iron ore mine in Western Australia, with production from the expansion to begin in the fourth quarter of calendar 2007.

Another bottleneck is coking (or metalurgical) coal:


Anglo American Plc and Japan’s Mitsui & Co. Ltd. will start digging a $516 million Australian coal pit, seeking to take advantages of record prices for metallurgical coal, which is used by steelmakers.

BHP Billiton also mines coking coal, and several announcements in the last few months indicate they’re ramping up their production too.

Once these bottlenecks are reduced, JFE Steel Corp., Japan’s second- largest steel producer, said prices of iron ore and coking coal will probably decline next year on increased supplies (Bloomberg).

And then hopefully steel prices will go down …

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