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Fortescue says China still hungry for our iron ore despite trade spat

Australian mining giant Fortescue says it continues to see strong Chinese demand for iron ore cargoes, as the nation’s most valuable export appears untouched by a deepening trade dispute between Australia and China.

After a Chinese official this week tweeted a doctored image of alleged Australian war crimes and China introduced a stiff new tariff on Australian wine, questions have surfaced about the likelihood of Beijing adding iron ore to the growing list of Australian goods facing tariffs or other import restrictions. Western Australian Premier Mark McGowan, whose state is home to the Pilbara iron ore heartland, said he was worried iron ore cargoes could be next on China’s hitlist as the trade dispute intensifies.

But Elizabeth Gaines, chief executive of Fortescue, one of the nation’s biggest iron ore miners, said iron ore exports hit an all-time high of $10.9 billion in October, more than 80 per cent of which was shipped to China, and Chinese appetite remained robust.

“China’s steel industry continues to grow with crude steel production reaching 874 million tonnes in the ten months to the end of October 2020, an increase of 5.5 per cent compared to the same period in 2019,” Ms Gaines said.

“Fortescue continues to see ongoing strong demand from our iron ore customers in China.”

Fortescue, whose biggest shareholder is billionaire Andrew “Twiggy” Forrest, shipped 44.3 million tonnes of iron ore for the September quarter, achieving an average price of $US106 per dry metric tonne across the period, compared to $US85 a year earlier.

Ms Gaines said Fortescue’s enduring relationships with Chinese stakeholders were underpinned by a “multifaceted approach” spanning its key business pillars of iron ore supply, procurement, financing, investment and social engagement.

She said the ability of Australia’s mining sector to continue shipping iron ore during 2020, while other iron ore-producing nations have been heavily impacted by supply constraints, has been a “competitive advantage” for the country.

“The ongoing strength in demand for iron ore continues to play an important role in Australia’s economy, growth and development,” she said.

“However, it is important we do not become complacent and take the strength in demand for granted.”

Mining industry sources, not authorised to speak publicly about the matter, said other iron ore miners had also experienced no disruptions in exports to China and their order books were full.

Fortescue shares surged more than 13 per cent to an all-time high of $20.65 on Thursday after news Brazilian iron ore giant Vale slashed its output forecasts at a time of strong demand in China and as the benchmark iron ore price rocketed to a sky-high $US137 a tonne. It

BHP gained 4.9 per cent while Rio Tinto, the world’s biggest iron ore miner, gained 6.8 per cent to end the day trading at a 12-year high. Shares in Fortescue, BHP and Rio have inched lower in early trade on Friday.

Iron ore output in Brazil, the biggest supplier outside Australia, remains weak amid a slow recovery from disruptions caused by a wave of coronavirus infections among Vale’s workforce. Analysts say the tight seaborne iron ore market means China – where massive economic stimulus is boosting the need for steel – would struggle to substitute Australian iron ore if it wanted to.

“The increase in iron ore prices can be mostly attributed to strong steel demand in China but weaker seaborne supply has also contributed to the outcome,” Commonwealth Bank mining and energy commodities analysts Vivek Dhar said. “Rising demand and weaker supply has resulted in a tighter seaborne market.

October trade data from the Australian Bureau of Statistics, released on Thursday, showed the value of Australian iron ore exports continued to set new highs, growing by 4.1 per cent in the past month and 43.9 per cent compared to a year ago and earning Australia a record $11 billion for the month.

“It is the sweat and hard work of Australian workers in the mines, on oil rigs and in the gas fields that continues to support the economy,” Resources Minister Keith Pitt said.

“While 2020 has been a difficult year for many, with falls in global coal and oil prices, the trade data shows Australia’s resources and energy sector remains resilient and ready to supply the world as global conditions improve.”
Source: Sydney Morning Herald

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