BHP says sees early signs of recovery in mining

(Adds guidance, details)

SYDNEY, Oct (HKSE: 3366-OL.HK - news) 19 (Reuters) - BHP Billiton (NYSE: BBL - news) on Wednesday said it is seeing signs of recovery in commodities markets but cautioned that supply was still running ahead of demand amid stronger-than-expected steel consumption in China.

"We have seen early signs of markets rebalancing," the world's biggest mining company said.

"Fundamentals suggest both oil and gas markets will improve over the next 12 to 18 months. Iron ore and metallurgical coal prices have been stronger than expected, although we continue to expect supply to grow more quickly than demand in the near term," the company said.

BHP said it was on track to meet its fiscal 2017 production guidance for iron ore of 265-275 million tonnes versus 257 million last year after posting a modest 1 percent decline in output to 67 million tonnes in the September quarter.

Guidance for copper production was under review following a power disruption this month at the Olympic Dam mine, but otherwise BHP said it was sticking with earlier estimates for its other businesses.

Olympic Dam copper production fell by 26 percent to 41,000 tonnes, a result of scheduled maintenance work over the quarter and the power outage, BHP said.

Morgan Stanley (Xetra: 885836 - news) estimates that China's implied apparent steel consumption in September rose 12.5 percent from a year ago and 2.8 percent from the previous month. That is good news for mining companies looking to China to turn around otherwise sluggish demand.

Fellow Australian miners Rio Tinto (LSE: RIO.L - news) and Fortescue Metals Group are scheduled to release operations data and updated guidance on Thursday.

Most forecasters earlier in the year were calling for Chinese steel production and consumption to contract as its economy recoils.

However, China's iron ore imports reached 93 million tonnes in September, the second highest on record, as healthy profits pushed steel mills to ramp up steel output.

Spot iron ore stood at $58 a tonne on Wednesday the highest price in over a month.

Metallurgical coal prices have more than doubled this year to around $230 a tonne, while nickel has gained 16 percent.

(Reporting by James Regan; Editing by Lisa Shumaker, Bernard Orr)