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Australia’s Fortescue Metals, barely four year after starting commercial mining, said on Friday its year-on-year net profit surged 76% to just over $1 billion driven by resilient demand from China. Shipments by the world’s number four exporter rose only slightly to 40 million tonnes, but the price it achieved jumped 68%.
BHP Billiton, the world most valuable miner, is set to report a record $22 billion in annual profit on Wednesday thanks in large part to its iron business.
The stellar numbers come as global blast furnace growth over the next five years is predicted to rise by a staggering 300 million tonnes as China’s construction boom continues unabated. On top of that India’s iron ore exports could halve over the same period further bolstering prices that in percentage terms have outclassed even that of gold as the world economy recovered post the 2008 collapse.
China, the world’s largest iron ore consumer, imported 618 million tonnes of iron ore last year, supplied by Fortescue and the world’s top three mining groups BHP Billiton, Rio Tinto and Vale. Fortescue only shipped its first ore in 2008 and has since grown to over $5 billion in revenues.
Research consultants Wood Mackenzie said in July that Chinese construction spending won’t slow down until 2020 and China needs to import 1 billion mt of iron ore due to the relatively high cost and the low quality of its domestic supplies. This will keep spot prices of iron ore above $150/mt through 2015. Iron ore traded at $172/tonne in July.
The Wall Street Journal reports Fortescue is planning to expand production more than six-fold.
CNBC interviewed Fortescue CEO Nev Power who said Fortescue is heavily linked in to China’s success and China’s growth going forward, making the company “relatively immune” from what’s going on in the US and Europe.
Reuters reports since 2009, the price of iron ore has risen more in percentage terms than gold and oil, owing in large part to continued strong demand from Chinese steel mills.
MINING.com reported on Monday lower shipments from India, which exports almost half the 200 million tonnes it produces, should help bolster prices that have more than tripled in three years before massive Australian projects come on stream around 2014.
MINING.com reported in July the so-called commodities bible – Cyclope’s World Commodity Yearbook – just published in English is a testament to how the pricing of iron ore from secretive negotiations and annual contracts to prices linked to the spot market constitutes a “true revolution”.
Image is of the construction phase of the futuristic tower for China Central TV, the state-run media company in Beijing by architect Rem Koolhaas. The building has 473,000 m of floor space. Credit Jakob Montrasio / Flickr
