Fortescue upbeat on China with big miners to snatch dividend crown
Fortescue sees no slowdown in China demand that has supported historically high prices and left the iron ore heavyweights awash with cash and set to shower shareholders with bank-beating dividends.
Brad ThompsonReporterJan 28, 2021 – 5.40pmFortescue Metals Group chief executive Elizabeth Gaines is confident Chinese demand will continue to underpin the high prices that have left the iron ore producer and its bigger rivals BHP and Rio Tinto awash with cash and set to deliver bank-beating returns to shareholders.
Ms Gaines poured cold water on suggestions China was about to scale back steel production, saying Fortescue was not seeing any slowdown in the demand that has put the big three miners exporting from Western Australia on track to steal the dividend-paying crown from the big four banks.
Fortescue Metals Group chief executive Elizabeth Gaines has no fears for Chinese steel mill demand. Philip Gostelow
However, her rosy outlook did not stop the Fortescue share price losing ground for the second day running, down more than 4 per cent to $22.73.
Shaw and Partners analysis shows the big miners paying out $16.4 billion in full-year dividends based on their ASX shares compared with $16.1 billion for the big four banks.
UBS puts the miners ahead of ANZ, Commonwealth Bank, National Australia Bank and Westpac by an even wider margin, $18.8 billion to $17.7 billion.
RELATED QUOTES
FMGFortescue Metals Group
$22.730 -4.01%View FMG related articlesJan 20Aug 20Jan 215.50016.50027.500Updated: Jan 29, 2021 – 8.19am. Data is 20 mins delayed.AdvertisementMacquarie analysts expect Fortescue to deliver an interim dividend of $1.37 a share on February 18 that will add some $1.53 billion to the fortune of chairman and founder Andrew Forrest.
The Macquarie forecast is based on Fortescue’s updated guidance for record first-half earnings of $US4 billion-$US4.1 billion and the company maintaining a dividend payout ratio of 80 per cent.
Dr Forrest revealed last week that Fortescue had raked in more than $US940 million ($1.2 billion) of net profit in December alone, which prompted the company to issue its profit update last Friday.
Lowering emissions
The update raised hopes of a much bigger full-year dividend than the expected $2.40 if Fortescue were to sustain anything like the December numbers.
Handing down December quarter results on Thursday, Ms Gaines said she was not concerned by reports China would accelerate plans to cut steel production in 2021.
“We are certainly not seeing any indication of a slowdown in demand,” she said.
“There is obviously a strong focus in China around improving emissions or lowering emissions and we certainly see that there are some targets to reduce capacity of some of the steel mills that are less efficient.
“More broadly, from our customers we are not seeing any indication of a slowdown and in fact average daily offtake from iron ore inventories is around 3 million tonnes.
“We are seeing steel inventories at low levels and we are seeing strong ongoing demand for iron ore.”
Ms Gaines said the past 12 months had highlighted the importance of the resources sector to the Australian economy.
“There are a number of ways that we contribute to the economy. Firstly through job creation and investment,” she said.
Strong demand
“I think that is absolutely critical, particularly as Australia recovers from the impact of COVID-19.
“The payment of taxes obviously supports the national economy, the payment of royalties supports the state economy and the dividends and returns to our shareholders.
“We are currently seeing a cycle of very strong demand for commodities, particularly strong demand for iron ore, which is supporting a historically high iron ore price.”
Fortescue shipped a company record 90.7 million tonnes in the first half, including 46.4 million tonnes in the December quarter, as it cashed in on high iron ore prices.
Average revenue was $US122 a tonne, which represents about 91 per cent of the Platts benchmark price for the quarter.
BHP has just chalked up its most productive six months on record in iron ore, shipping 144.1 million tonnes from WA to meet Chinese demand.
Improvement in relations
And Rio is on track to post a full-year underlying net profit of almost $US12 billion, but could surpass its 2011 record profit of $US15.5 billion if iron ore prices hold.
Despite COVID-19 lockdowns in China early last year, crude steel production grew by 5.3 per cent in 2020.
Ms Gaines predicted more modest growth in 2021 but said it would be enough to support current prices and see China chase even more supply.
“Sitting here today I would predict 1-2 per cent growth in crude steel production,” she said.
“Even at modest levels of crude steel production growth that still underpins strong demand for iron ore in the current market and also a requirement for additional supply of iron ore.”
Fortescue also sees hope for an improvement in the frosty relations between Beijing and Canberra that have led to trade sanctions or unofficial import barriers on commodities such as coal, barley, copper, seafood, red meat and timber.
Ms Gaines said she was encouraged by US President Joe Biden indicating he would apply strategic patience and adopt a multilateral approach in foreign policy.
Fortescue is facing production cost pressures in the second half associated with the strength in the Australian dollar and the ramp-up of production at its new Eliwana mine.
The company has also flagged a blowout on the cost and timetable for its $US2.6 billion Iron Bridge magnetite project in WA’s Pilbara region.
Fortescue said on Thursday that it had started a detailed review of the Iron Bridge budget and schedule that would take into account access to skilled workers, the strength of the Australian dollar and the continuing impact of the COVID-19 pandemic.
The strength of the Australia dollar is also set to be a factor as Fortescue’s existing iron ore operations come under cost pressure in the second half of 2020-21.
Fortescue kept first-half costs to $US12.81 a tonne in the December quarter, in line with the previous three months, but has maintained guidance of $US13-$US13.50 for the full year. The cost forecast is based on an assumed exchange rate of 70¢ against the greenback but the Australian dollar is currently up around 76¢.
The company’s guidance for full-year shipments remains unchanged at 175-180 million tonnes with capital expenditure also unchanged at $US3 billion-$$US3.4 billion.
Ms Gaines said shareholders had been supportive of Dr Forrest’s vision to make Fortescue a giant in renewable energy on top of its iron ore operations.
Customers in China had not shown any concern about Fortescue’s plans, detailed by Dr Forrest, to spearhead development of a major green steel-making industry in Australia using WA’s abundant iron ore reserves.
- Forums
- ASX - By Stock
- Ann: Quarterly Production Report
Fortescue upbeat on China with big miners to snatch dividend...
-
- There are more pages in this discussion • 4 more messages in this thread...
You’re viewing a single post only. To view the entire thread just sign in or Join Now (FREE)
Featured News
Add FMG (ASX) to my watchlist
|
|||||
Last
$17.97 |
Change
-0.360(1.96%) |
Mkt cap ! $55.32B |
Open | High | Low | Value | Volume |
$18.10 | $18.28 | $17.97 | $250.7M | 13.82M |
Buyers (Bids)
No. | Vol. | Price($) |
---|---|---|
7 | 104054 | $17.96 |
Sellers (Offers)
Price($) | Vol. | No. |
---|---|---|
$18.07 | 4370 | 1 |
View Market Depth
No. | Vol. | Price($) |
---|---|---|
2 | 3800 | 17.960 |
11 | 1487 | 17.950 |
3 | 6628 | 17.930 |
1 | 1500 | 17.920 |
28 | 7848 | 17.900 |
Price($) | Vol. | No. |
---|---|---|
18.070 | 4370 | 1 |
18.080 | 270 | 1 |
18.140 | 1700 | 2 |
18.150 | 100 | 1 |
18.160 | 100 | 1 |
Last trade - 16.10pm 23/08/2024 (20 minute delay) ? |
Featured News
FMG (ASX) Chart |
The Watchlist
SER
STRATEGIC ENERGY RESOURCES LIMITED
David DeTata, Managing Director
David DeTata
Managing Director
SPONSORED BY The Market Online