Quarterly production data for Fortescue Metals Group (FMG) showed iron ore exports dipped at the start of this year.
FMG shipped 38.7 million tonnes of iron ore in the March quarter, down from 40.7 million tonnes in the three months to December 2017.
Total iron ore mined came in at 41.6 million tonnes, down from 47.5 million tonnes in the previous quarter.
A short time ago, Fortescue shares were more than 4% lower in early trade:
The broader materials index is around 2%, with Rio and BHP both lower while South32 has lost almost 10% following a dive in aluminium prices overnight.
FMG said mining output was slowed by planned maintenance and wet weather, while cyclone activity at its port operations dragged on quarterly shipping numbers.
The AFR reports that FMG’s quarterly shipping result was the lowest since June 2014 and means Fortescue is now behind schedule to meet its annual export target of 170 million.
While research from the World Steel Association indicates Chinese steel demand will fall over the next couple of year, Fortescue is optimistic about the upcoming quarter.
“The rebound in steel demand post Chinese New Year was slower than expected,” FMG said in a statement this morning.
“A seasonal lift for the remainder of this quarter is expected to be supportive of steel markets and is key to the ongoing strength in iron ore demand.”
“Profit margins for China’s steel mills have declined from the peaks reached in the December 2017 quarter and there are now signs that steel mills are refocussing on costs resulting in increased demand for Fortescue’s high value-in-use lower iron content ores.”
Fortescue’s unit costs also rose by 9% from the previous quarter, which the company attributed to lower production volumes, a higher Australian dollar and rising fuel costs.
It means full-year costs are now likely to exceed FMG’s guidance of less than $12 per tonne. Revised full-year costs are now expected to be in a range between $12-$12.50 per tonne.
The company added that it’s now completed the transition of its restructured loan arrangements to reduce interest costs.
The company said the new loan facility will reduce annual borrowing costs by $130 million — up from the $80 million in savings flagged at its half-year results in February.
FMG’s quarterly production results:
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