(Adding more comments on China, production, costs)

LONDON (AFX) - BHP Billiton PLC, the Anglo-Australian miner, expects global copper supply to exceed demand in the second half of 2005 as more production comes on stream.

However, in the first half, demand will continue to outstrip supply, thus keeping the market in deficit for the year as a whole.

"Based on our assessment of the market, we may see it move to a surplus in the second half of 2005. But it will still be in deficit for the whole year," John Crofts, marketing director of BHP's base metals business, said in an analysts' briefing.

This year, the supply shortfall will still be "considerable," driven largely by the China's "ravenous" need for copper, he said.

Copper prices have soared over the past months, reaching their highest in over a decade this week, as the market feeds China's insatiable demand for the metal.

China has now surpassed the US as the biggest market for copper, consuming 3 mln tonnes this year, or nearly 20 pct of the global production of 16 mln tonnes.

China will remain a key growth driver for the market in the coming years, despite Beijing's efforts to ease the rapidly expanding domestic economy.

Chinese demand is holding up well and there has been no signs that demand is abating, with the Chinese market seen still growing "in excess of 10 pct" going forward, Croft said.

That will mainly fuel the steady growth in the global market, he said, adding that he considers the industry's forecast of an annual 3.5 pct growth in the world demand "realistic."

Despite the expected excess supply next year, BHP is not changing its expansion plans aimed at bringing annual copper production to 1.4 mln tonnes by 2008.

BHP cut output during the early years of 2000 to ease the dramatic fall in copper prices brought about by the supply surplus.

"Demand is quite firm... so cutting production is very, very far (from BHP's plans). We're not worried about that today," said Diego Fernandez, president of the base metals' division.

In 2004, the group's production is on track to achieve its programmed 1 mln tonnes, he added.

Glenn Kellow, the division's chief financial officer, said costs are well under control despite pressures brought about by soaring oil prices and rising energy prices in Chile.

"We don't expect cost increases bigger than 10 pct," he said.

Chile hosts BHP's largest mine, Escondida, in which it holds a 57.5 pct stake.

mbe/jc