UPDATE 2-BHP Billiton sees mixed commodities demand outlook
* BHP Q4 iron ore output drops 10 pct
* China's build up of commodities inventory almost complete
* Restocking starting to occur in North America
By James Regan
SYDNEY, July 22 (Reuters) - Restocking of commodities in China may have ended, coinciding with fresh inventory building in other markets and painting a mixed picture for global demand, BHP Billiton (BHP.AX) (BLT.L), the world's largest miner, said.
Analysts have long warned that an upturn in demand for copper, iron ore, nickel and other industrial staples could have had more to do with buyers in China lapping up imported tonnages at cheaper prices as a $585-billion domestic stimulus package took shape ahead of any recovery in overseas industrial activity.
"Investment levels for most commodities have been relatively low, making it difficult to gauge what is restocking and what is real demand," said Rob Craigie, an analyst for FW Holst & Co.
Since last September, as the financial malaise gripped commodities, China almost alone has kept world commodities markets above water, in some months reporting record imports.
In the short term, BHP Billiton said, underlying demand trends in its markets for minerals and metals were still being masked by de-stock and stocking activities, despite evidence of activity in North America, Japan and Europe.
"The 2009 financial year proved to be very challenging, with significant demand contraction exacerbated by dramatic movements in inventory levels," BHP Billiton said.
In its June quarter production report on Wednesday, the firm reported a 10 percent fall in iron ore output to 27.048 million tonnes after its operations were hit by mining fatalities and flooding in Australia.
By comparison, Australian rival Rio Tinto (RIO.AX)(RIO.L) this week posted record quarterly production of 53 million tonnes from its Australian mines.
"Give is safety issues, BHP was always going to come in with a lower number, so this was not entirely unexepcted," said James Wilson, a mining analyst with DJ Carmichael & Co in Perth.
"But iron ore is less important to BHP, which has its butter spread thinner than Rio and can make it up in other commodities, where Rio cannot," Wilson said.
BHP Billiton's output of metallurgical coal, used in steel-making, rose 4 percent in the June quarter on the previous year, while copper output fell 21 percent, BHP Billiton said.
Copper production was cut due to lower grade ore mining and reduced output from milling operations at its 57.5 percent-owned Escondida copper mine in Chile, the company said.
BHP said it would shut its troublesome Laguna mill at Escondida in the September 2009 quarter for 45 days to do repairs and boost reliability.
A second mill was operating normally, a company spokesman said.
Escondida's mined copper output was down 37 percent to 111,500 tonnes, while cathode production rose 22 percent to 49,400 tonnes in the last quarter.
BHP also reported production up 6 percent in petroleum products in the year and 4 percent higher in the last quarter on prior corresponding quarter.
Output of all base metals was down on the year, except for zinc.
Iron ore production in the fourth quarter of 27.048 million tonnes took full year output to 114.415 million tonnes, up 2 percent on the year but short of a targeted 130 million tonnes.
In April, the company warned of missing the target over safety issues in the iron ore division during the year and bad weather in earlier quarters.
BHP Billiton responded to five fatalities in the iron ore division by limiting site access and suspending some night work.
In fiscal 2009, 68 percent of iron ore sales from its Western Australian operations were based on annually agreed pricing.
This compares with more than half of spot sales by rival Rio Tinto Ltd/Plc (RIO.AX)(RIO.L) so far in calendar 2009.
Neither BHP Billiton or Rio Tinto have announced any contract sales agreements for the current shipping year with customers in China, a main market for ore shipments.
BHP Billiton has said it would like to scrap annual contract sales in favour of more market-based pricing, such as indexing.