Australia's third largest iron ore producer Fortescue Metals Group Ltd (FMG) has announced its production highlights for the fourth quarter of 2009.
According to the Perth-based company's statement released on January 21, in the fourth quarter of 2009, FMG's iron ore production increased by 8.17 percent year on year, reaching 9.15 million metric tons. However, the output volume declined 11.17 percent quarter on quarter. Meanwhile, in the last quarter of 2009, the miner's shipments increased by 44.62 percent year on year to 9.08 million mt, down 4.66 percent quarter on quarter.
In the last quarter of 2009, FMG achieved a milestone with the first shipment of products sold to a customer outside of China. It is the company's stated objective to broaden its customer base and expand outside of China and this was achieved in December when 170,000 metric tons of iron ore were shipped to one of Asia's largest and most reputable non-Chinese steel mills. The customer is now looking for a second shipment in the near term.
On the other hand, in the quarter in question, FMG's production costs increased by 3.77 percent over the previous quarter reaching $22,04/mt, while its total direct costs rose by 3.12 percent quarter on quarter to $27.43/mt.
Commenting on the benchmark prices in FY 2010-2011, FMG said, "As most are aware, Japan, South Korea, Taiwan and Europe accepted a benchmark in the current contract year but China did not. Going forward, it is widely forecasted that the annual benchmark price will increase significantly in China and elsewhere, if and when new benchmark pricing arrangements are set for the 2010-11 contract year. Currently there are a wide variety of independent market forecasts for the benchmark, ranging from an increase of between 25 percent, up to 50 percent above the current level of the non-China benchmark. However, it also remains a possibility that, as per the previous contract year, there will not be a benchmark agreed for China in the next contract year beginning April 1, 2010."
"The strength of the spot market into China remains one of the key reasons for an expectation of a possible significant benchmark rise for the next contract year, but there are many other factors including steel price, demand and available capacity to be considered. The current spot prices are currently as high as $110/mt on a delivered basis for an iron ore grade similar to the FMG Rocket Fines product," reads the company statement.