BHP says Fortescue Vale tie-up okay

Mining giant BHP Billiton says it's unlikely to suffer adverse impacts from a potential tie-up between Brazilian giant Vale and Fortescue Metals Group

Global miner BHP Billiton believes Chinese steel production will be subdued this year. (AAP)

Mining giant BHP Billiton says a potential tie-up between Fortescue Metals Group and Vale would not affect demand for its products.

Fortescue has struck a non-binding agreement with Brazilian mining giant Vale which could allow it to take a minority stake in Fortescue and invest in current or future mining assets.

BHP President of operations, Minerals Australia, Mike Henry said the iron ore market had been functioning well and there had been healthy competition between the world's largest iron ore exporters.

"In terms of what it means for our sales and our pricing we continue to see strong demand for our high quality product," Mr Henry told reporters on the sidelines of the global iron ore and steel forecast conference in Perth on Tuesday.

"We have been achieving full price for it, we continue to achieve full price for that product so it's not something we would expect to impact us directly."

Mr Henry added that BHP did not try to forecast spikes in the iron ore price such as an almost 20 per cent jump overnight to $US63.74 a tonne.

BHP expects Chinese steel production to be subdued this year but it believes it will grow over the long term.

BHP's new West Australian president of iron ore Edgar Basto said the company continues to forecast growth in Chinese steel production into the mid 2020s, peaking at around 935 to 985 million tonnes from around 800 million tonnes in 2015.

"Overall steel and pig iron production are expected to be subdued in 2016, however we continue to expect Chinese steel production to grow," Mr Basto told the Global Iron Ore and Steel Conference in Perth on Tuesday.