SYDNEY, Jan 20 (Reuters) - BHP Billiton, the world's largest miner, on Wednesday gave its most upbeat outlook for commodities markets since the global downturn, as surging Chinese demand led to a big jump in iron ore shipments.
The company highlighted a strong price recovery across its key commodities, from iron ore and copper to zinc and nickel, in the December quarter, led by surging Chinese demand as well as restocking in developed economies.
"Government stimulus measures appear to have supported a gradual return to normalised global trade, albeit from a low base, and most key indicators across the developed economies showed improvement," it said in a production report.
BHP Billiton's closely watched output of iron ore, the main material used to manufacture steel, leapt 11 percent in the quarter from a year earlier, mirroring strong production data from rivals Rio Tint and Vale.
But BHP Billiton warned that the pace of recovery in rich economies remained uncertain as stimulus funding was withdrawn.
"Consequently we expect some degree of volatility in the short term outlook for our commodities," it said.
Iron ore prices under negotiation with steel mills are forecast by analysts to rise by as much as 40 percent this year after recoiling in 2009/10 as steel-makers turn up production and miners struggle to keep pace. Spot market prices are already running at almost twice the annual benchmark price.
For the half year ended December 2009, BHP said 54 percent of its Australian iron ore shipments were sold at the contract price and the rest on shorter-term reference pricing.
Copper output, as expected, fell 11 percent in the December quarter after an accident at its Olympic Dam mine in Australia.
The mine has run at a quarter of capacity since the accident in October, which led to the closure of its main haulage shaft. The mine lost 20,000 tonnes production in the December quarter and is scheduled to be back to normal by the end of March.
Industrial action at the company's Spence mine in Chile cut quarterly production by a further 28,000 tonnes.
Copper prices MCU3 have risen over 130 percent in the last year and some analysts are projecting a supply deficit later in 2010, aggravated by the production shortfall at Olympic Dam.
Output of metallurgical coal, used in steel-making, was down 12 percent.
Nickel production rose 20 percent, owing to a stronger output at its Australian mines, lifting BHP's exposure to rising prices in the sector despite a deepening global supply surplus.
London Metal Exchange nickel MNI3 is fetching about $19,300 per tonne versus $13,000 a year ago.