https://www.engineeringnews.co.za

Fortescue tie-up with a China steel group makes sense – official

28th May 2015

By: Reuters

  

Font size: - +

SYDNEY – Debt-heavy Australian iron ore miner Fortescue Metals Group could find willing investors in Chinese steel mills anxious to ensure multiple sources of supply for the raw material, a senior Chinese government official said on Thursday.

Media reports this week said Fortescue - already about 15%-owned by Chinese steelmaker Hunan Valin - has held talks with Chinese industrial conglomerates CITIC and Baosteel Group. Fortescue said only it was not aware of any parties seeking regulatory approval to take a stake in the company.

Li Xinchuang, vice secretary general of the China Iron & Steel Association, said Chinese steel producers were a natural fit to help Fortescue compete through price cycles with mega-miners Vale, Rio Tinto and BHP Billiton .

"The key for them is to have a good partner to help them pay their money back," Li told Reuters on the side of a business conference.

Fortescue relies almost exclusively on sales to China for its revenue.

Li predicted the ore price was unlikely to budge much from its recent price range, averaging between $55/t  to $65/t this year and would go only slightly higher in 2016.

That's more bullish than Citigroup, whose annual average price forecast is $40/t  over 2016-2018.

Fortescue in April refinanced $2.3-billion of its $9-billion in gross debt on a third attempt, but was forced to pay a higher yield amid investor concerns about the state of the iron ore market.

It is facing repayments of $6.3-billion in 2019 and the company in recent weeks has reiterated a willingness to consider fresh investors in its mines or support operations, such as rails and ports.

Iron ore fell to a decade-low of $46.70/t in April and even at just above $60 currently, is less than half of last year's peak.

Fortescue in April said it had improved its total delivered cost by 17% on the prior quarter, and was targeting a break even price of $39/t.

Li also forecast total Australian iron ore imports to China in 2015 would rise by 30-million tonnes to 600-million this year over 2014.

This was not surprising given higher production targets set by Rio Tinto and BHP this year, as well as Fortescue.

Edited by Reuters

Comments

Showroom

AutoX
AutoX

We are dedicated to business excellence and innovation.

VISIT SHOWROOM 
Stewarts & Lloyds
Stewarts & Lloyds

Stewarts & Lloyds today supplies steel and tube, pipe and fittings, valves, pumps, irrigation, fencing, profiling and roofing products. The cash...

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION







sq:0.101 0.157s - 156pq - 2rq
Subscribe Now