Australia’s Fortescue Metals Group cut its price guidance for iron ore sales for the year to end-June 2018, citing subdued construction activity in China, some ongoing steel production restrictions and global trade worries.
Fortescue amended its guidance to around 65 per cent of the average benchmark Platts 62 CFR index, due to a slower than anticipated recovery in contractual realisations.
It said its iron ore sold at 68 per cent of the Platts index in the first half of fiscal 2018.
China has been switching 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’s first-half 2018 profit fell 44 per cent due to weak prices for its lower quality iron ore.
“As market conditions stabilise, price realisation as a percentage of the Platts 62 CFR index is expected to increase,” Fortescue said.
“This view is supported by an expectation of strengthened demand for lower iron content ores as steel mill margins moderate and end users look to lower their raw material input costs.”
Fortescue shares fell 3 per cent in morning trade to touch a 19-month low at A$4.47, compared with a 0.6 per cent gain in the Australian benchmark
Reporting by Ambar Warrick in Bengaluru; editing by Richard Pullin.
