Fortescue Secures Construction Contracts for Very Large Ore...

Fortescue Secures Construction Contracts for Very Large Ore Carriers
Fortescue Metals Group Ltd (ASX:
FMG, Fortescue) has taken another significant step towards
reducing its costs and securing the supply of efficient seagoing
vessels with the signing of a contract with a Chinese shipyard for the construction of four v
ery large ore carriers (VLOC) valued at around US$275 million.
The vessels will be delivered from November 2016 through to May 2017
with the majority of payments made upon delivery and funded from operating cashflows.
The 260,000 dwt (dead weight tonnage) class vessels, which will
account for approximately six per cent of Fortescue’s shipping fleet requirements, are much l
arger than the traditional capesize vessels that have dominated the
seaborne market and incorporate design specifications ideally
suited to Port Hedland’s tidal conditions.
Fortescue Chief Executive Officer Nev Power said the contract represents a strategic decision to
secure long term, low cost freight on vessels that will complement
infrastructure at Herb Elliott Port and maximise shipped volume.
We are already in the shipping business, with an annual forecast spend of around US$1.5 billion a year,” Mr Power said.
“These vessels are a natural extension of our supply chain
and will play a significant role in increasing efficiencies at the Port
and lowering costs. They also reflect and strengthen our close
relationship with China, our largest customer.”
Fortescue was instrumental in the research and development of t
he vessels to ensure design specifications complemented Port Hedland’s tidal conditions and
shallow natural harbour. In recent times the average size of
vessels has been increasing although only a small proportion
are in the 250,000 dwt or greater segment. The larger vessels
offer operational efficiencies andhigher carrying capacity but they
do not significantly deviate from the size parameters of vessels currently operating in the Pilbara.
Mr Power said the contract was consistent with Fortescue’s strategy of improving efficiencies and
lowering its cost base. “Owning and managing vessels especially
designed to complement conditions at the Port and to maximise shipped volume is expect
ed to reduce our costs below benchmark rates,” Mr Power said.