Fortescue reports huge iron ore order from China despite the slump
21 November 2008
Fortescue Metals, Australia's third largest iron ore mining company, has contracted increased iron ore supplies to one of China's top 5 steel mills at a fixed contract price, at a time when major global steel manufactures, including Chinese steel majors, have cut production or shut down at least temporarily some of their manufacturing plants amidst a global economic slowdown, chairman Graeme Rowley said.
Speaking at the company's annual meeting yesterday, Graeme Rowley said a mysterious Chinese steel manufacturer will now take 5.5 million tonnes of ore in 2009, increasing its offtake from the previous contract for 2 million tonnes, which is almost triple the quantity of ore it will buy under an existing long-term sales contract by 3.5 million tonnes at the same contract price.
The company refused to divulge the Chinese steel manufacturer's name, citing commercial confidentiality reasons. Fortescue has signed its 2009 sales contracts with China's third biggest steelmaker, Wuhan, which is a unit of Hebei Iron, and its fifth biggest steelmaker, Tangshan Iron & Steel.
One commentator said that Fortescue is going against the global trend and is able to increase its sales to China even during the current economic slowdown, which even its larger rivals BHP Billiton and Rio Tinto cannot do.
The three global mining giants - Vale, BHP Billiton and Rio Tinto - have already slashed their iron ore production due to the fall in demand for steel that has forced large steel manufactures to cut production by nearly 20 per cent. The world's biggest steel maker, ArcelorMittal, also cut back production by as much as 30 per cent.
Commentators say that one of the reasons could be that Chinese steel manufacturers may see a local surge in construction of low housing, railways, modernisation of airports and other infrastructure projects as the Chinese government has earmarked 60 per cent of the $586 billion economy boosting package to infrastructure as announced by the Chinese government in the second week of November. (See: China pumps $586 billion to bolster economy)
