Fortescue is working to resolve its iron ore negotiations in China while maintaining full-year guidance and managing growing product inventories.
The miner shipped 46.8 million tonnes during the September quarter but recorded sales of 42.9 million tonnes, with the difference reflecting ongoing negotiations with China Mineral Resources Group (CMRG).
Fortescue expects inventories to increase by another four million to five million tonnes during October as it optimises product placement channels. The company said operations could be affected, potentially including production adjustments, if the negotiations were not concluded by the end of 2026.
Fortescue said it remained focused on good-faith negotiations grounded in “fair and proper market practices”.
The sales dispute compounded an operational quarter affected by Fortescue’s largest-ever shutdown across its port operations. Work included replacing critical infrastructure in a train unloader as well as major components on a reclaimer and shiploader.
Total shipments were six per cent lower than the corresponding period in FY26 and 11 per cent below the June quarter. Iron ore processing declined four per cent year on year to 48.8 million tonnes, although ore mined increased four per cent to 62.7 million tonnes.
Fortescue Metals and Operations chief executive officer Dino Otranto described the shipment result as solid given the scale of the maintenance program.
“We shipped 46.8 million tonnes of iron ore in Q1, including 2.5 million tonnes from Iron Bridge,” Otranto said.
“That’s a solid result, especially with our teams carrying out our biggest-ever shutdown across port operations.”
Cost pressure also emerged during the quarter. Fortescue’s hematite C1 unit cost rose 13 per cent from the June quarter to $US21.98 per wet metric tonne. The result was also 21 per cent higher than a year earlier, with elevated diesel prices adding approximately $US1.40 per wet metric tonne.
Fortescue attributed the remaining increase to broader inflationary pressures and lower volumes moving through its supply chain.
The company achieved a hematite price of $US79.79 per dry metric tonne, equivalent to 82 per cent of the average Platts 61 per cent CFR Index. Iron Bridge concentrate generated $US111.09 per dry metric tonne, or 115 per cent of the benchmark.
The growing inventories also affected operating cash flow and contributed to a broader increase in working capital.
Fortescue ended September with $US3.2 billion in cash, down from $US5.1 billion at the end of June. Net debt increased from $US900 million to $US2.8 billion after the company paid a $US1 billion final dividend and invested $US916 million during the quarter.
Despite the sales disruption and higher costs, Fortescue maintained its FY27 guidance of 197–207 million tonnes of shipments, including 11–14 million tonnes from Iron Bridge. It also retained hematite C1 cost guidance of $US20.50–$US21.75 per wet metric tonne.
However, both targets remain subject to the outcome of the CMRG negotiations.
Alongside the immediate market pressures, Fortescue advanced projects intended to support its longer-term Pilbara production profile.
The company increased the Blacksmith project’s Mineral Resource by 153 per cent to 615 million tonnes and declared a maiden ore reserve of 196 million tonnes grading 58 per cent iron. Fortescue is positioning Blacksmith to help replace production as some of its established mines mature.
“We’ve now reported our first ore reserve at Blacksmith – 196 million tonnes at an average grade of 58 per cent iron,” Otranto said.
“That’s a major milestone for the team and a strong result from an asset we acquired for its potential to unlock significant value.
“As existing mines mature, Blacksmith will play an important role in maintaining production and ensuring Fortescue remains positioned as a low-cost, capital-efficient operator.”
Beyond its iron ore operations, Fortescue also reached a commercial milestone for its patented Toowong Process during October, selling more than 40 tonnes of copper concentrate treated using the arsenic-removal technology.
“There is strong global demand for more copper and Fortescue’s world-first arsenic removal technology, developed in Queensland, has the potential to significantly enhance the economic viability of high-arsenic copper deposits,” Fortescue growth and energy chief executive officer Gus Pichot said.
“We will consider using the technology in our own copper exploration projects globally, and it could be hugely important for our peers as well.”