Fortescue Metals Group set to begin high-grade output

19-Nov-2018

Fortescue Metals Group chief executive Elizabeth Gaines has confirmed the miner will begin producing its new higher-grade West Pilbara Fines iron ore product from next month.

Speaking at the company’s annual meeting yesterday, Ms Gaines said the new 60 per cent iron product would comprise a blend of ore from Fortescue’s Firetail mine and newly developed areas to the west of its Cloudbreak mine in the Pilbara.

Fortescue expects to begin exporting the product at a rate of between 10 million tonnes a year and 20mtpa, ramping up to 40mtpa as its new Eliwana mine comes online at the end of 2020.

The Andrew Forrest-controlled miner has developed the product in response to widening discounts for its standard lower-grade 58 per cent iron ore in China.

The discounts have been caused by a crackdown on pollution in the country, prompting steel makers to favour higher-grade, less-polluting inputs.

The price spreads across varying grades have been exacerbated in recent months because of high steel mill profitability, allowing producers to afford steep premiums for higher-grade ores.

But the price spreads have moderated in recent weeks on softening steel mill margins.

Speaking to reporters after the meeting, Ms Gaines said environmental and supply side reforms in China were structural but steel mill profitability was the biggest driver in the spread in iron ore prices.

“We know steel mills are very sensitive to their input costs so that’s really what’s driving some of that narrowing in the spreads,” she said.

Ms Gaines said it was not yet known how winter steel production restrictions in China would affect the market, but she cited record annualised steel production in October, which showed the market remained strong.

Mr Forrest confirmed the company was still working to enhance the numbers and eliminate risk on its Iron Bridge magnetite project near Port Hedland with an announcement expected before the end of the year.

However, he said it would have to be a “spectacular Fortescue-style investment or we’re not going to do it”.

The 7.9-billion tonne project is a joint venture with Taiwan’s Formosa Group and China’s Baosteel.

Ms Gaines said she was surprised, like everyone else, by BHP’s recent runaway train derailment. “We’re very confident in our ability to control our trains,” she said.

However, she said it was important to understand what had happened and for the broader industry to learn from the incident.

Fortescue this year celebrated its 15-year anniversary, 10 years since its first ore and its one-billionth tonne of ore shipped.

Source: THE WEST AUSTRALIAN