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FMG’s Christmas Creek mine.
Australia’s third biggest iron ore miner Fortescue Metals Group (ASX:FMG) is expanding its customer base beyond China as concerns over the use of commodities as collateral for loans in the Asian giant has sparked recent volatility in prices for the steel making material.
The company’s CEO, Nev Power, told The Age Fortescue had started supplying customers in South Korea, and wanted to test Japan and other Asian markets next.
Despite Power’s confidence, the company stock got hammered Wednesday, as Sydney-based investors rushed to sell off iron ore miners fearing of a further fall in the commodity price, which is currently trading at about US$106 a tonne.
Fortescue shares fell 3.5% to close at $4.63. Of more concern is the fact that the stock has now fallen over 20% this calendar year, basically mimicking the drop in iron ore spot prices.
Worries over an economic slowdown in China — the world’s largest iron ore importer — have contributed to the industrial metal’s 21% drop so far this year, placing the commodity firmly in bear market territory.
Speaking at the Macquarie Australia Conference, Power said he expected the current volatility in iron ore prices to blow over soon. He added there already are some positive signs, such as the joint US$1bn bid by China’s Baosteel and Aurizon (ASX: AZJ) for Aquila Resources (TSE, ASX: AQA), which he considers a vote of confidence in the Australian mining industry and the iron ore market.
Images courtesy of Fortescue Metals Group
