Australia's emerging mining company Fortescue Metals (Fortescue) has announced the increase of its iron ore sales to China at a time when the global steel and mining sectors are suffering from weakening orders.
Accordingly, Fortescue has concluded an agreement to enhance its existing long-term contract with one of China's top five steel mills; however, the company has preferred not to disclose the name of the mill on the basis of commercial confidentiality.
This agreement will provide for an increase of 3.5 million mt of iron ore to be purchased by the customer in question over the next financial year at the prevailing benchmark price annually negotiated by the industry. Beyond 2009, the mill has committed to purchasing ten percent of Fortescue's total production, while during 2008 the customer has met its purchase obligations under its contract with Fortescue.
Accordingly, the contract has now been amended by the parties with the mill committing to take deliveries of up to 5.5 million mt per annum over the 2009 financial year, as the total output tonnage to be reached by the miner is estimated at 55 million mt per annum during the year in question. The company has also said that the demand for expanded tonnage reflects the steel mill's satisfaction with the quality of Fortescue's iron ore.
As previously reported by SteelOrbis, Fortescue has reduced its sales target for the whole of 2008 by two million mt to 20 million mt in order to carry out work on its export terminal in Western Australia.