BHP: making hay - FT.com If farmers can cash in when the sun shines, so can mining companies. BHP Billiton edged up its iron ore production guidance on Tuesday to 212m tonnes from 207m for the financial year ending next June. The iron ore price has crept up during the past few months; the commodity contributes more than half of the miner's pre-tax earnings. Investors rewarded BHP by pushing its shares up 3 per cent. But how long can the run on iron ore continue? Much of the rebound in demand has been supported by a substantial fall in inventories at China's steel mills since March. But the outlook for steel demand is brightening as well. Construction, mostly housing, accounts for the biggest chunk of China's steel consumption. While residential floor space sold this year has jumped 24 per cent from the same period last year, new starts of residential buildings are up just 6 per cent. This suggests more construction will follow as property developers seek to maintain such strong sales growth into next year. And in spite of fears that China's property market has overheated, there is still a shortage of housing supply. The population of Beijing, for example, has grown an average 15 percentage points faster than the housing supply during the past five years, according to China Confidential. That should leave the iron ore miners to bask in the sunshine, at least in the near term. BHP and Rio Tinto can deliver ore to China for an all-in cash cost of below $50 a tonne. That equals handsome profits with the ore price at $135/t, having rebounded about a fifth since June. The danger is further out. Growth in construction in China will slow eventually. The risk is that the slowdown occurs just as big miners such as Vale, Rio, BHP and Fortescue - which account for 70 per cent of the seaborne iron ore market - bring planned iron ore expansions on stream. Rio, for example, has the option to boost its iron ore output by 29 per cent to 375m tonnes by 2018. Investors should keep a close eye on the harvest and the changing weather.