Defying the softening market demand for iron ore, BHP Billiton announced on Wednesday a 24 percent hike on its iron ore output while admitting at the same time that the company's copper production has retreated significantly in the face of a protracted labor problem.

In a statement, BHP officials have conceded that 14-days of strike on its Escondida copper mining site in Chile largely contributed to the mining firm's copper concentrate extraction by at least 24 percent, a trend that will unfortunately be sustained for the rest of the 2011-2012 financial year.

"Escondida production is now expected to be marginally lower in the 2012 financial year with volumes weighted to the second half," the company statement declared according to reports by Reuters.

BHP added that its Chilean operation was mostly hounded by a force majeure declaration that took effect earlier in July and was only lifted by the first week of September, by which time its toll has been absorbed by the global miner's overall copper production.

And the outlook is not exactly promising as BHP's Australian mining sites are once again threatened by weather systems that are forecasted to hamper production activities in Queensland from October thorough December, essentially replicating the scenario last year that chipped away huge production capabilities during the early months of 2011.

Despite the gloomy picture ahead, BHP agreed with its closest rival's assertion, Rio Tinto, that both production and demands for iron ore and copper will witness the anticipated surges in the months and quarters ahead.

The brave stance was made amidst the looming reality that China is positioning to rationalise its steel production, which is part of Beijing's overall strategy to avert the overheating of its economy.

"The overall market is in panic as small mills have started to shut down some blast furnaces, while big ones are relying on their existing iron ore inventories and reduced buying," once Chinese ore trader was reported by Reuters as saying in describing the shifting market landscape for iron ore and copper.

Even as BHP reported that its iron ore production jumped from 35.53 million tonnes in the June quarter to 39.57 million tonnes in the September quarter, the figures fell short from earlier shipment projections of about 43 million tonnes for the last quarter.

It did not help too that spot prices are declining as Chinese mills shunned from purchasing the volumes that they used to snatch in the past, pushing down major indexes to their lowest level over the past 13 months, Reuters said.

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