Fortescue profits tumble as China seeks higher-grade iron ore

27th Aug 2018

Fortescue Metals Group reported a sharp fall in full-year profits as Chinese steel mills, the key destination for the company’s product, began favouring higher-grade iron ores. 

The Australian mining giant reported net profit after tax of $878m for the 12 months to the end of June, down 58 per cent from a year earlier.

Revenues fell 18 per cent to $6.9bn as the average price the ASX-listed miner received for its iron ore fell to $44 per dry metric tonne, from $53 a wet metric tonne in the year prior, the company said.

“The reduction in average price received is primarily attributable to high steel mill profitability in China which incentivises use of higher iron content ores to maximise production,” Fortescue said in a statement.

Over the past several years China has moved to slash steel production capacity in a bid to modernise outdated industrial sectors and limit environmental damage. 

Fortescue chief executive Elizabeth Gaines noted operating costs – per tonne of iron ore mined and moved to port – were down 4 per cent for the year and at a record low of $12.36 per wet metric tonne, thanks to “ongoing productivity and efficiency improvements”.

The company, which shipped 170m tonnes in the fiscal year, reaffirmed its 2019 outlook for shipments of 165m-173m tonnes, and costs of $12-$13 a tonne. 

Source: FINANCIAL TIMES