Australia's Fortescue sees sustained iron ore demand from China
- Fortescue is also undertaking a detailed review of construction costs at its $2.6 billion iron bridge project, which is due to produce first ore in the first-half of 2022.
MELBOURNE: Fortescue Metals Group Ltd said on Thursday it expected sustained iron ore demand from Chinese steelmakers, but it warned of potential rising costs at a flagship iron ore project.
The world's fourth-largest iron ore miner reported a flat growth in second-quarter production from the same period last year, but a record-half year output which came as iron ore prices hit record highs, suggesting healthy dividends in financial results on Feb. 18.
"We are not seeing any indication of a slowdown ... We are seeing steel inventories at low levels. We are seeing ongoing strong demand for iron ore," Chief Executive Officer Elizabeth Gaines told reporters.
China's industry minister last month urged its steel sector to produce less crude steel this year amid the government's carbon neutrality scheme.
The company posted a 4.7% jump in shipments in the three months to Dec. 31 to 46.4 million tonnes (Mt), from the previous quarter, in line with UBS estimates.
The average price received for iron ore during the quarter rose a whopping 60.5% to $122 per dry metric tonne, realising 91% of the 62% Platts benchmark average. Iron ore prices hit record highs at $175 a tonne in December.
Last week, Fortescue forecast half-year net profit after tax between $4 billion and $4.1 billion from $2.45 billion recorded a year earlier.
"The recent big iron ore price tailwind, delivered big free cash flow and earnings (pre-released last week), which should in turn flow through to a big 1H21 and FY21 dividend," said Peter O'Connor of broker Shaw and Partners.
Rivals BHP Group and Rio Tinto also reported strong iron ore output for the period and sounded upbeat on the commodity's outlook.
Fortescue is also undertaking a detailed review of construction costs at its $2.6 billion iron bridge project, which is due to produce first ore in the first-half of 2022.
For its Eliwana project, where first ore was processed last month, Fortescue forecast a capital expenditure of $1.38 billion, up from an early estimate of $1.28 billion.
It maintained its full-year shipment target of 175 Mt to 180 Mt and costs at $13.00 to $13.50 a tonne.
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