Australia’s Fortescue Metals Group Ltd expects iron ore demand to be strong next year thanks to a solid Chinese steel market and post-pandemic recoveries in other countries, a senior company executive said on Wednesday.
Iron ore prices soared this month towards $150 a tonne due to ongoing supply issues in Brazil where miner Vale trimmed its 2020 output forecast last week, pushing up prices which have already gained more than 80% this year.
“We continue to expect strong market dynamics,” Fortescue’s Danny Goeman, director of sales and marketing, said.
“Obviously supply continues to be constrained. On the demand side, even outside of China, our customers keep telling us there is very strong steel demand,” he told a briefing that marked the start of ore processing at Fortescue’s Eliwana mine expansion.
Shares in the world’s fourth biggest iron ore miner have more than doubled to as high as A$21.80 this year, as it forges ahead with several major projects.
“Customers are now telling us all their order books are full up to the second quarter and for most of them into the third quarter, which obviously shows significant momentum in China,” Goeman said.Behind that push has been China’s vast manufacturing sector, which is less seasonal than other sectors and has been supported by consumer demand for household goods.
A steel-making recovery following coronavirus lockdowns in countries such as South Korea, Japan and India, has also attracted cargoes that would normally go to China.
That, coupled with potential supply disruptions, have sparked concerns among Fortescue’s customers and others that China’s port stockpiles could fall below 100 million tonnes in the first quarter next year, Goeman said.
Brazil is heading into the wet season, Australia is facing its cyclone season, while in China, domestic iron ore mining usually dies down during the northern hemisphere winter.
“We expect the market to be strong probably for the entire year … So overall we are optimistic about the strength and the endurance of the iron ore market,” he said.Fortescue’s western hub includes the $1.275 billion expansion at the Eliwana mine, a new plant that can process 30 million tonnes a year, and a new 143 km (89 mile) rail line.
Fortescue is also on track to have the first ore from its $2.6 billion Iron Bridge magnetite mine ready for export in the first half of 2022, Chief Executive Elizabeth Gaines said.
It has kept this year’s total production forecast at 175 million to 180 million tonnes.
The miner also is building natural gas and solar infrastructure as well as transmission lines to supply its remote mines with low-carbon energy and help the company reach net zero operational emissions by 2040.
Its Fortescue Future Industries unit, unveiled last month, plans a huge global green energy drive and will start with an investment decision next year on green ammonia production on the southern island of Tasmania.