Iron ore producer Fortescue Metals on Tuesday reported a 2 percent fall in third-quarter iron ore shipments on reduced demand in China, while the discount for its lower quality ore also widened.
The world no. 4 iron ore miner said it received 62 percent of the average benchmark Platts 62 CFR index for its ore during the quarter, down from 68 percent in the first half of fiscal 2018.
However, Fortescue said an expected seasonal lift in demand should support steel markets for the rest of the current quarter, and it held its full-year price realisation guidance steady at about 65 percent.
“Profit margins for China’s steel mills have declined from the peaks reached in the December 2017 quarter and there are now signs that steel mills are refocussing on costs, resulting in increased demand for Fortescue’s high value-in-use lower iron content ores,” the company said.
The company also increased its expected full-year production cost target.
The price for Fortescue’s ore had fallen as China has switched to higher grade, less polluting iron ore in a bid to reduce winter smog, boosting demand for premium ore, much of which comes from Brazil.
Fortescue cut its iron ore price forecast for the full year in March, citing subdued construction activity in China, some ongoing steel production restrictions and global trade worries.
Its first-half 2018 profit fell 44 percent due to weak prices for its lower quality iron ore. Fortescue said it shipped 38.7 million tonnes in the March quarter compared with 39.6 million tonnes a year ago.
The company maintained its fiscal 2018 shipment guidance at 170 million tonnes.
Fortescue said its cash production costs rose one percent in the third quarter from a year earlier to average $13.14 per wet metric tonne. The miner raised its full-year cost target to $12 to $12.50 per wet metric tonne, from $11 to $12 per wet metric tonne.
Reporting by Susan Mathew in Bengaluru; editing by Richard Pullin.
