BHP Billiton, the world's biggest mining company, boosted its iron ore output by 3 percent in the December quarter, as it races to supply more of the raw material to Chinese steelmakers despite signs of a softening market.

The increase was slightly below analysts' forecasts, but the shortfall is unlikely to dent the ever-rising tonnages of Australian iron ore bound for China, where demand growth is expected to slow this year.

The risk, say analysts, is that miners may flood the notoriously fickle market for seaborne-traded iron ore, where prices can rise or fall by as much as 50 percent in a matter of months.

China's iron ore imports are expected to grow only by 25 to 50 million tons this year, according to the China Metallurgical Mining Enterprises Association, a slower pace than previous years.

Moreover, China's own mines already supply about half the mills' needs, with some 200 million tons of additional capacity capable of being reactivated on short notice.

Iron ore prices have tumbled 8 percent since a short-lived restocking drive by Chinese steel mills lifted iron ore to $158.50 per ton on January 8. 

BHP plans to boost output an overall 5 percent, or 9 million tons, to 183 million tons in the year to June 2013.

Reuters