Fortescue Metals Group Ltd., Australia’s third-largest iron ore exporter, said second-quarter shipments jumped 44 percent on record demand from Chinese mills.
Shipments reached 9.1 million metric tons in the three months ended Dec. 31, from the 6.3 million tons a year earlier, Perth-based Fortescue said today in a regulatory statement. That’s below a UBS AG estimate of 9.5 million tons.
Rio Tinto Group, Australia’s biggest exporter, had record sales from its Pilbara mines last quarter as demand surged from China, the world’s biggest buyer. Contract iron ore prices may jump 50 percent this year, according to forecasts by Nomura Holdings Inc. and Bank of America Merrill Lynch.
“There are a wide variety of independent market forecasts for the benchmark, ranging from an increase of between 25 percent, up to 50 percent,” Fortescue said in the statement.
Fortescue declined 2.9 percent to A$4.99 at the 4:10 p.m. Sydney time close on the Australian stock exchange. The stock has jumped 12 percent this year as cash prices for iron ore for immediate delivery rose to their highest in at least 13 months.
Steelmakers in Japan and South Korea last year won a 33 percent price cut for annual prices from suppliers including Rio Tinto. Chinese steelmakers didn’t reach an agreement after failing to persuade miners to offer a bigger reduction.
No Settlement
“It also remains a possibility that, as per the previous contract year, there will not be a benchmark agreed for China in the next contract year beginning April 1, 2010,” Fortescue said today without elaborating.
The company is seeking to widen its customer base outside of China and has shipped its first cargo to a non-Chinese Asian buyer, Fortescue said today. In October, the iron ore producer said it was in talks to sell to South Korean and Japanese mills.
“It is one of the major mills of Asia, and a name widely respected in the industry,” Executive Director Russell Scrimshaw told reporters today on a conference call. “This particular customer, I am certain, will be the first of several who are coming along behind them.”
Fortescue failed last year to complete a planned $6 billion funding deal with Chinese lenders as it sought financing to expand operations to more than double exports by 2012.
The company is seeking to ship about 40 million tons this year prior to an expansion in 2011 which will boost capacity to 55 million tons a year, it said. Production costs in the quarter increased to $27.43 a ton from $26.60 a ton, the company said.
Fortescue had cash of $706 million at the end of December, up from $704 million at the end of the previous quarter, Chief Financial Officer Fiona Barclay said on the call.
Source: Bloomberg
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