MELBOURNE (Reuters) - BHP Billiton (AX:BHP) (L:BLT) does not expect recent rise in iron ore and metallurgical coal prices to hold for more than a few months, as more low cost supply is set to hit the market, its Australian chief said on Thursday.
There has been a genuine pick-up in demand for steel in construction, which is partly seasonal, and in turn iron ore and coal, coming on the heels of a period where inventories were run down, BHP Billiton Minerals Australia president Mike Henry said.
"That has led to the run-up in price. But as you see more low cost volume come to market, here in Australia as well as elsewhere, you would expect that prices will not be sustained at these high levels," he told reporters.
Iron ore prices have surged 74 percent over the past four months to more than $60 a tonne.
"So I think we're going to see this for a few months, and then things will come back off again," he told the Melbourne Mining Club.
Henry shrugged off risks to its business from a brewing steel trade war, in which China's competitors led by the United States are pressing Beijing to cut output to reduce a global glut and said the fight was unlikely to impact long-term demand for iron ore and coal.
BHP continues to believe that Chinese steel demand will peak in the middle of the next decade, in contrast to some who say it has already peaked.
"You'll continue to see slow growth in steel in China. It will be made from more efficient blast furnaces," Henry said.
BHP this week flagged it was embarking on a rail maintenance programme on its iron ore network in Western Australia over the next 24 months that will put it on a more stable footing to reach a long-held target of 290 million tonnes of capacity.
Henry declined to say exactly when the company expected to reach that target, but flagged it was likely to be before 2020.
"There's obviously going to be some interplay with the rail maintenance that we have underway. But all of that is going to set us up to get there quite quickly," he said.
Henry would not be drawn on whether BHP Billiton is eyeing the Moranbah and Grosvenor metallurgical coal mines that Anglo American (LON:AAL) has put up for sale, as Reuters reported last week.
"Opportunities that we look at will be competing against a very healthy internal portfolio of growth projects that are very high-returning. So we should never see...acquisitions as high likelihood, although we're never going to say never," he said.