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BHP holds iron ore output outlook despite virus risks

Mackenzie is silhouetted against a screen projecting the company's logo at a round table meeting with journalists in Tokyo

MELBOURNE (Reuters) - BHP Group on Tuesday reported a 6.3% rise in third-quarter iron ore production that slightly missed analyst estimates, and maintained its iron ore forecast despite global economic disruption caused by the coronavirus outbreak.

The world's largest listed miner warned, however, that global steel production excluding China could drop sharply this year in light of the pandemic, and that capital spending in 2021 would be lower than its current outlook of $8 billion.

The company kept its annual outlook for iron ore production unchanged at 273-286 million tonnes but said petroleum output would likely hit the bottom end of previous guidance of 110-116 million barrels of oil equivalent.

It also revised to the lower end of range its outlook for metallurgical coal after heavy rains in Australia's Queensland state, and put energy coal and copper production forecasts under review given temporary shutdowns of its Cerrejon coal mine in Columbia and its Antamina copper mine in Peru.

BHP shares fell 1.6 percent in an Australian market down 0.7 percent at 0035 GMT.

"It's not too bad considering the events and what’s going on at the moment," said analyst Glyn Lawcock of UBS in Sydney.

"Their downgrades are not severe but we wait and see what the next 12 months holds. A lot of guidance hinges on mobility restrictions starting to lift from May. If they don’t because of a recurrence of COVID-19, then that is a risk," he said.


GLOBAL DISRUPTIONS

The coronavirus crisis has upended economic activity globally, but BHP has so far maintained that most of its operations remain unaffected by the pandemic despite a "small number" of its 72,000 employees testing positive for COVID-19.

"While demand in China has strengthened in recent weeks, we expect other major economies, including the U.S., Europe and India, to contract sharply in the June 2020 quarter," Chief Executive Officer Mike Henry said.

Peer Rio Tinto Ltd, last week reported higher-than-expected first-quarter iron ore production, but cut its forecast for annual copper output, while Brazilian miner Vale SA cut its iron ore forecast on Friday due to coronavirus restrictions.

Reported cases of the coronavirus have crossed 2.41 million globally and 165,854 people have died, according to a Reuters tally.

BHP estimated steel output, excluding China, could contract by a double digit percentage in 2020 as virus-induced restrictions lead to curtailments in major producer countries.

BHP produced a record 68 million tonnes of iron ore in the quarter ended March 31, up from 64 million tonnes in the cyclone-disrupted period a year earlier. However, it missed a UBS forecast of 69.2 million tonnes.

It also flagged a deferral of several smaller petroleum projects, as well as a delay of $200 million in exploration and development spending for the sector which it said was equivalent to 30% of its usual budget.


(Reporting by Shashwat Awasthi and Nikhil Kurian Nainan in Bengaluru; Editing by Shounak Dasgupta and Lincoln Feast.)