Fortescue bullish on Chinese iron ore trade

Brad ThompsonReporter

Oct 13, 2020 – 5.57pm

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Andrew Forrest's Fortescue Metals Group remains bullish about the iron ore trade with China despite diplomatic tensions and bans on Australian coal imports.

Fortescue chief executive Elizabeth Gaines said on Tuesday that demand from Chinese steel makers was so strong it was absorbing iron ore being diverted from weaker markets hit by the COVID-19 pandemic.

Fortescue has approval to boost exports from its Port Hedland facilities. Bloomberg

However, Ms Gaines echoed warnings from West Australian premier Mark McGowan about Australia's relationship with China and other major trading partners.

"Now more than ever we cannot lose sight of the fact that we are a trading nation," she told the Diggers and Dealers mining conference in Kalgoorlie.

"Our trading success is built on strong partnerships. It is important that we maintain good relations with existing trade markets such as China."

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China purchased 87 per cent of iron ore sold by Australian producers in 2019-20 when the value of the trade hit a record $102 billion.

Mr McGowan opened the conference on Monday with a swipe at the Morrison government over its deteriorating relationship with China and the risk it poses to the mining industry.

Ms Gaines said Fortescue was seeing strong Chinese demand for all its iron ore products and the strength in the market had underpinned a very strong start to the financial year.

Chinese steel production continues to grow and reached 689 million tonnes in the eight months to the end of August, up 3.7 per cent year-on-year, in what Ms Gaines said was a remarkable economic recovery post COVID-19 restrictions.

Meanwhile, iron ore stocks at ports and steel mills remain at relatively low levels.

Fortescue also believes it will be in a much stronger position if a shift in the market cycle sees a return to discounting for lower grade iron ore, an issue which peaked for the company in fiscal 2018 when it received just 64 per cent of the ''benchmark'' iron ore price.

Ms Gaines said Fortescue was well on the way to having the option of using magnetite concentrate from its $US2.6 billion ($3.6 billion) Iron Bridge project to blend with its traditional iron ore products.

Fortescue expects to complete Iron Bridge, its new Eliwana iron ore mine and significant energy projects in the next two years with about 5000 workers employed in the construction phase and 1500 on-site jobs once operational.

The company is on target to have its first ore on train from Eliwana in December and first ore on ship from Iron Bridge in mid-2022.