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Iron ore miner Fortescue Metals Group Ltd on Thursday reported flat third-quarter iron ore shipments and joined other big miners in trimming its annual shipments forecast because of disruptions caused by a tropical cyclone.
The world’s no. 4 miner of the steelmaking commodity cut its fiscal 2019 shipments estimate to 165 million-170 million tonnes, down from 165 million-173 million tonnes.
The impact of the cyclone, coupled with a dam disaster in Brazil that restricted Vale SA’s production, has led to a surge in iron ore prices this year, propelling Fortescue’s stock about 80% higher in 2019
Fortescue shipped 38.3 million tonnes in the quarter to March 31, compared with 38.7 million tonnes in the same period last year, but above an average of estimates of 36.5 million tonnes by Goldman Sachs and UBS.
“Closure of the Port Hedland port, combined with localised flooding in the area caused by Tropical Cyclone Veronica in late March, resulted in the loss of five days of shipments equating to 2.5 million tonnes,” Chief Executive Officer Elizabeth Gaines said.
The impact of the cyclone, coupled with a dam disaster in Brazil that restricted Vale SA’s production, has led to a surge in iron ore prices this year, propelling Fortescue’s stock about 80% higher in 2019.
Fortescue has been attempting to shore up demand by moving to produce higher grade iron ore, given that its lower grade products had fallen out of favor with Chinese buyers facing environmental restrictions.
The company recently started shipping mid-grade iron ore to pump up its margins, and reiterated that it expected to deliver 8-10 million tonnes of the new product in fiscal 2019.
The combination of the mid-grade iron ore and higher prices for the steelmaking material helped drive Fortescue’s average realised price 47% higher over the previous quarter to $71 per dry metric tonne in the period, it said.
Earlier in April, the miner said it would spend about $2.6 billion with a Taiwanese partner to develop a “premium product” iron ore project in Western Australia.
“The Iron Bridge product will increase our average grade, providing Fortescue with the ability to deliver the majority of our products at greater than 60 percent iron grade,” Gaines said.
Bigger rivals BHP Group and Rio Tinto both cut their forecasts for annual iron ore output earlier this week due to Cyclone Veronica.
(Reporting by Aditya Soni and Ambar Warrick; editing by Richard Pullin)
