UPDATE 2-Big miners:slower China steel growth to weigh on iron ore
* Rio Tinto sees weaker iron prices in H2 2013
* Drop to coincide with easing Chinese steel growth
* Australians still expanding heavily despite outlook
PERTH, March 19 (Reuters) - Australia's big iron ore miners have cautioned that China can no longer be counted on for unchecked opportunity, warning of volatile markets and softer prices as growth in China's steel production slows.
The big miners are sticking to aggressive expansion plans to feed Chinese demand for iron ore, even after the market was rattled for much of last year by doubts over future demand from China.
Rio Tinto , BHP Billiton and Fortescue Metals Group, the world's second, third and fourth biggest iron ore miners behind Brazil's Vale, plan to add a combined 235 million tonnes of new mine capacity by 2015, nearly equal to Rio's total output in 2012.
"We're seeing steel demand growth slowing inevitably. That is going to put downward pressure on iron ore prices," Greg Lilleyman, Rio's head of Pilbara iron ore operations, told a conference here on Tuesday.
"We're going to see downward pressure in the second half and perhaps beyond, but we still see pretty strong prices," he added.
BHP's Tony Ottaviano, vice president of planning, said iron ore prices would "remain volatile" as more supply hits the market at a time of moderating Chinese demand.
Rio Tinto forecasts steel demand to grow by about 3 percent a year for the next 5-10 years. This is well down on 10 percent growth rates in 2009-2011.
Iron ore prices shed more than 9 percent last week as a drop in Chinese buying fueled concerns that a hoped-for pickup in construction activity was not occurring.
Benchmark 62-percent grade iron ore stood at $134.60 a tonne on Tuesday, hovering just above a near three-month low hit late last week, but still well up on a price below $87 a tonne in September last year.
Citigroup forecast an average selling price for 2013 of $120 a tonne, but others are less bullish, with UBS suggesting iron ore prices could tumble as low as $70 a tonne, although probably not this year.
"We see short-term market volatility (in iron ore and steel) as part of the process of Chinese economic development," said David Woodall, director of operations for Fortescue.
"We would be delighted with a price of just $110-$130 a tonne," he said.
Lilleyman said Rio was well advanced in its aim of boosting iron ore output by about 15 percent this year to 290 million tonnes, while a target of 360 million tonnes by 2015 was also on schedule.
"We certainly still forecast (China's) steel demand growth over the next 5-10 years somewhere around 3 percent ... essentially peaking around 2030 at around 1 billion tonnes," he said.
Steel demand in China stood at around 680 million tonnes in 2012, based on analyst and industry estimates. Crude steel output reached a record 716.5 million tonnes.
Lilleyman said Rio Tinto, which derives more than two-thirds of its revenue from iron ore, is counting on its rich ores and low mining costs to provide hefty profit margins despite any cyclical downturns in the market.
His confidence is rooted in economies of scale, which allows Rio Tinto to mine iron ore for around $24 a tonne, compared with around $30 for BHP and over $50 for Fortescue.