another a$3 bln on iron ore expansion , page-21

goodyear is optimistic on iron ore prices BHP Billiton chief optimistic on iron ore prices
Fri Nov 25, 2005 7:37 AM GMT

PERTH (Reuters) - Mining giant BHP Billiton remained optimistic on the outlook for iron ore prices, its chief executive said on Friday, despite Chinese calls for lower prices from the current round of price negotiations.

Speaking at a media briefing after the Australian leg of BHP Billiton's annual meeting, Chip Goodyear said demand in the iron ore market was still strong.

"If you look at the iron ore market it is one that certainly recently has continued to show spot prices in excess of contract prices."

Goodyear declined to comment on contract negotiations underway or provide his prediction of the outcome of the talks between iron ore miners and the steel mills.

The big mining companies demanded prices hikes of over 70 percent this year for shipments to steel makers, but industry analysts expect a much more modest increase in the coming year, with Chinese producers in particular expected to drive a harder bargain.

"Where we are today is simply a process whereby the buyers and sellers are communicating with each other about what they see in the market. I think, as you say, everyone is talking his own book, but the expectation is that this will be a year of great excitement in the iron ore business. The entertainment value will be high."

Goodyear also said that, as the world's second biggest copper producer, BHP Billiton was enjoying, but not getting too carried away by the current high prices.

Copper prices surged to record highs this month after speculation gripped the market that a Chinese copper trader had amassed a huge short position.

"We don't build our expectations of price on this kind of event," he said. "We have defined quite a pragmatic approach to our business because we think about it over multi-decades."

"It's great to pick up the windfall when it happens, so therefore we are benefiting, but obviously we watch ourselves to exposure, and obviously do not fall in love with a product that's impacted by short-term events."

Goodyear said all operations of the company were running at 100 per cent of capacity, but declined to comment on future revenue or profit.

"The economies around the world are probably doing a little better than we expected," he said.

"Energy prices have had some impact, but generally global growth continues to look very good. China continues to look strong on an overall basis. Europe's probably the one that lags a little bit."

"The resource market continues to be in a position of under-supply. You'll probably see some balance come into that market as time goes on, supply ultimately equals demand."