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BHP Billiton expected iron ore prices to recover as high-cost producers in China stop production, JPMorgan Chase said, citing a meeting with the biggest mining company’s executives.

As much as 140 million tons of annual Chinese capacity is unprofitable at current iron ore prices, JPMorgan analysts including Lyndon Fagan wrote in a report dated Tuesday, citing comments made by BHP chief executive Marius Kloppers at a meeting with analysts in Sydney.

Steel mills might start placing purchase orders as they begin to restock iron ore over the next eight to 12 weeks, Fagan said, citing Kloppers.

Chinese Premier Wen Jiabao is overseeing a $23 billion (R192bn) investment in new mills to stimulate vehicle making and housing to reignite growth that fell in the second quarter to the slowest in three years.

The spot price of iron ore may gain as much as 67 percent to average $145 a ton in the fourth quarter, according to the median of seven analysts estimates.

Iron ore for immediate delivery to the Chinese port of Tianjin has dropped 52 percent over the past year to a three-year low of $86.90 a ton on Tuesday.

Neville Power, the chief executive of Australia’s third-largest iron ore producer Fortescue Metals Group, said a week ago that the price might rebound to $120 a ton later this year.

BHP was unlikely to pursue acquisitions in the “near term”, the report said, citing Kloppers. Assets that were for sale in the Gulf of Mexico were not a strategic fit, Kloppers said.

Coking coal prices might not gain as producers respond more swiftly than BHP had anticipated, JPMorgan said, citing the company. The coking coal market will continue to expand until 2025 or 2030 before it stagnates, BHP said.

Kloppers also didn’t know if the Jansen potash project in Canada would be approved, according to JPMorgan. – Bloomberg