Fortescue Metals Group Ltd., Australia’s third-biggest iron ore exporter, is in talks to sell to Japanese and Korean mills for the first time as it seeks to take market share from Rio Tinto Group and BHP Billiton Ltd.
“We’ve been in active discussions with them,” Executive Director Graeme Rowley said today in an interview. As “contracts come up for renewal I would expect that they will come and talk very positively with us about us joining in their supply chain,” he said, without further identifying the mills.
Fortescue, which started its A$2.8 billion ($2.6 billion) project last May, has sold all the ore produced to steel mills in China, the world’s biggest buyers. The mills it’s talking to have contracts to buy ore from Rio and BHP, Australia’s two largest exporters, Rowley said.
Fortescue, controlled by billionaire Andrew Forrest, rose 2 percent to A$4.17 at the 4:10 p.m. Sydney time close on the Australian stock exchange. The Perth-based company has more than doubled in market value this year to A$13 billion. It plans to boost capacity by the end of next year with a A$360 million expansion of its Christmas Creek mine.
The company will “largely” finance expansion plans by itself to bring production up to 95 million metric tons a year after failing to agree on terms for $6 billion in funding from China, Forrest said last week. Expansion of Christmas Creek will take total capacity to 55 million metric tons by the end of 2010, Rowley said today.
China’s demand for iron ore means it would likely play a more dominant role in pricing iron ore over time, Rowley said, adding that he supported efforts to change the annual contract period to the calendar year.
“A January 1 price date is eminently sensible,” he said. “The April 1 was based around the Japanese financial year.”
Source: Bloomberg
See also: Fortescue posts Q3 loss
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