Australian iron ore miner Fortescue Metals Group has warned that rising diesel prices linked to the Iran conflict could add billions of dollars to mining costs, together with severe disruptions in fuel supply routes, according to a report by Reuters.
Supply disruption drives diesel price spike
Reuters reported that the US-Israeli war on Iran has largely halted shipments through the Strait of Hormuz, tightening global fuel supply and pushing diesel prices higher. Benchmark Singapore diesel swaps rose to slightly above $180/barrel, compared to $92.5/barrel before the conflict, according to London Stock Exchange Group (LSEG) data.
Cost impact on miners
According to Fortescue’s metals and operations CEO Dino Otranto, every $0.10 increase in diesel prices results in a $70 million impact on the company’s cost base. Otranto also indicated that, for the top four global iron ore miners, each $0.10 increase translates into approximately $500 million in additional costs.
Decarbonization offsets cost pressure
Fortescue stated that it currently remains comfortable with its fuel inventories, which are largely sourced from Southeast Asia. However, the company noted that this position depends on the conflict not escalating further, as prolonged disruptions could tighten supply conditions.
The company also emphasized that its decarbonization strategy is helping reduce exposure to fuel price volatility. Fortescue expects to save at least $100 million in diesel costs over the next 12 months and plans to cut consumption by one billion liters of diesel equivalent in the coming years.
Otranto noted that the company’s decarbonization agenda had previously faced criticism, but shareholder expectations are now shifting toward faster implementation.