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Markets News

UPDATE 2-Fortescue sees early signs steel-making recovery in Japan, S Korea

* Fortescue logs 5% increase in iron ore shipments

* Fortescue says approval process for Queens Valley has restarted

* More global stimulus expected to drive COVID-19 recovery - CEO (Adds analyst comment, expansion plans)

MELBOURNE, Oct 29 (Reuters) - Australia’s Fortescue Metals Group Ltd posted a 5% rise in first-quarter iron ore shipments on Thursday, fed by robust Chinese demand for the key ingredient in steelmaking, which an executive said was also improving elsewhere in Asia.

Iron ore prices have stayed buoyant this year despite a coronavirus-induced slump in demand for most commodities, as the world’s top metals user China ramped up infrastructure spending to counter the economic shock from curbs against coronavirus.

Signs are emerging of a recovery in other steel-making markets, said Greg Lilleyman, chief operating officer at the world’s fourth largest iron ore producer. “Steel-making activity is starting to pick up across Japan and Korea recently,” he told a news briefing.

Peer Rio Tinto had warned in October that a virus resurgence was putting global economic growth at risk, and that steel production outside China had dropped sharply.

Iron ore prices have tempered from last month’s five year highs, given easing coronavirus-related supply restrictions and lower stimulus spending from China, although analysts anticipate further global easing measures could support prices.

“We expect FMG will find support from investors given the price environment as well as potential for additional stimulus (driving demand),” RBC analysts said in a note.

Fortescue’s Chief Executive Elizabeth Gaines said on Thursday she welcomed the approach by investors worth $10.2 trillion who said they had written to the boards of global mining companies to better understand their engagement with First Nations people after Rio Tinto destroyed an ancient rockshelter in May.

In a government inquiry into the disaster, the Aboriginal Wintawarri Guruma group said Fortescue was withholding royalty payments of nearly A$2 million ($1.4 million) until it signed off on mining leases at the firm’s $287-million Queens Valley project, home to many sacred sites.

“The Queens Valley approval process has recommenced,” said Gaines, adding that the move was the outcome of discussions with Wintawarri, which Fortescue has met six times since June.

“We are working hard to facilitate the payment of those royalties.”

The Perth-based miner shipped a record 44.3 Mt of iron ore in the quarter ended Sept. 30, up from 42.2 Mt a year earlier, and in line with UBS estimates of 44.1 Mt. It said it was “well-positioned” to meet its full-year iron ore shipment forecast of 175 million tonnes to 180 million tonnes (Mt).

Its ore fetched $105.77 per dry metric tonne (dmt) in the quarter, up from $85 per dmt a year earlier, or 89% of the average Platts 62% CFR Index, up from 86% last quarter.

That let it finish paying down debt, to hold $1 billion in net cash. Five years ago net debt was $6.6 billion. (Reporting by Anushka Trivedi & A K Pranav in Bengaluru and Melanie Burton in Melbourne Editing by Vinay Dwivedi, Shounak Dasgupta and Amy Caren Daniel)

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