BHP Billiton has defended its strategy of expanding iron ore output into an oversupplied market as prices drop, saying its approach was rational and that it stopped major investments in new capacity four years ago.

"What we're doing very clearly is we're operating our enterprise in a very economically rational way," Alan Chirgwin, iron ore marketing vice president, told a conference in Singapore on Thursday.

Our performance will be dependent on being the most efficient supplier and it shouldn't be dependent on supply restraint.

BHP's Alan Chirgwin

"We took action, so it wasn't just words. In 2011, that's the last time our board approved billions of dollars of additional investment in expansion."

Iron ore slumped 39 per cent in the past 12 months as BHP and Rio Tinto and Brazil's Vale expanded low-cost output to boost sales volumes and cut costs, spurring a surplus as China slowed. Major producers remain intent on expansions and a battle for market share is under way as miners attempt to reduce their costs faster than prices are dropping, according to Credit Suisse.

The strategy has drawn criticism from rivals including Fortescue Metals Group and Glencore, which say the approach damages the industry.

It's also drawn flak from political leaders including West Australian Premier Colin Barnett and federal MPs who had proposed an inquiry into the industry.

"Our performance will be dependent on being the most efficient supplier and it shouldn't be dependent on supply restraint," Chirgwin said in response to a question.

"We have high-quality resources. We have a management team that's operating in a very cost-disciplined way. We should be taking advantage of those things."

BHP chief executive Andrew Mackenzie said on Tuesday that lower iron ore prices were here to stay as new mine output outpaced weaker growth in demand.

The world's largest mining company aims to cut costs by 21 per cent at its West Australian operations to $US16 a metric ton in fiscal 2016, Mackenzie said in a separate statement.

Overcapacity to persist

The China Iron & Steel Association told the conference overcapacity in the seaborne iron ore market would persist through to at least 2019.

Growth in low-cost supply would exceed cuts to output made elsewhere, including in China, CISA vice-chairman Wang Liqun said. Steel-demand growth in China was seen as flat this year, Wang said.

Chirgwin said supply would rise by about 100 million to 110 million tons this year, exceeding modest demand growth of about 30 million to 40 million tons.

"Low-cost seaborne supply entering the market is not only displacing high-cost Chinese production, but also high-cost seaborne supply," he said.

Less steel

Crude-steel output in China dropped 1.3 per cent to 270.07 million tons in the first four months this year from 2014, data showed on Wednesday. The country will use less steel this year and next, according to the World Steel Association.

Steel demand in China was facing short-term headwinds, and exports of alloy from the country were expected to remain high in the long term, Chirgwin told delegates. Steel output in China was expected to peak at 1 billion to 1.1 billion tons in the mid-2020s and plateau after that, he said.

"To get to rebalancing you've got to see high-cost iron ore production displaced and shut: we're still some way away," Chirgwin said. "That will keep pressure on prices until we are sitting here again next year."

Boost output

In 2015, the big four miners will boost output 100 million tons, while output cuts elsewhere total 80 million tons, Wang said in a presentation. The association is funded by China's major steelmakers and is the only nationwide industry body.

Global iron ore demand is seen improving through 2030 with China driving the increase, Rio Tinto Asia president of iron ore Alan Smith said at the conference. The London-based company will continue to meet the needs of customers, he said.

The seaborne glut will widen to 215 million tons in 2018 from 45 million tons this year, according to UBS Group. Exports from Australia are set to pick up in the second half on mine expansions, UBS said in a report this month.

"The second half of 2015 looks ominous as further supply looms and we expect the price to fall to $US45 a ton," Credit Suisse analysts including Matthew Hope said in a report on Thursday. "There is sufficient room for major producers, but only if all seaborne supply from small producers gives way."

Ore with 62 per cent content at Qingdao fell 0.5 per cent to $US62.58 a dry metric ton on Wednesday, according to Metal Bulletin. While prices rebounded from a low of $US47.08 on April 2, they're still 67 per cent below a 2011 record.