* Fortescue boosts shipments on strong demand
* Slightly upgrades full-year shipments forecast
* Lowers forecast for cost of production
* Shares down 12% since coronavirus impact (Adds comments on coronavirus from chief executive)
Jan 30 (Reuters) - Australia’s Fortescue Metals Group reported on Thursday a 9% rise in second-quarter iron ore shipments, and its CEO said demand remained strong and that its business had not been impacted directly by the new coronavirus outbreak in China.
“Market conditions remain very positive and there are predictions of further crude steel production increases in 2020,” Chief Executive Elizabeth Gaines said.
Since steel mills tend to stock up ahead of the Lunar New Year holidays, Fortescue doesn’t have any shipments scheduled for ports impacted by China’s virus-related lockdown until late February, Gaines told Reuters in an interview.
The world’s fourth-largest iron ore producer has seen no direct impact on its operations from the virus, although it has an “essential travel only” policy in place, she added.
China’s National Health Commission said the total number of confirmed deaths from the coronavirus in the country climbed to 170 as of late Wednesday and the number of infected patients rose to 7,711.
China’s iron ore imports in 2019 were their second-highest ever in a year, and were ramped up in December as Beijing boosted stimulus to avoid an economic slowdown, prompting strong demand from the property and infrastructure sectors.
Chinese demand for high-quality ore is expected to accelerate in 2020 following a trade deal with the United States and further infrastructure investment.
Fortescue shipped 46.4 million tonnes of ore during the quarter ended Dec. 31, up from 42.5 million tonnes a year earlier, to post a record first half of 88.6 million tonnes.
Broker RBC said Fortescue’s December quarter numbers had beaten its forecasts. “We expect the stock will remain an attractive proposition for those investors seeking iron ore exposure,” it said, adding that it expected prices to weaken in the second half.
Fortescue shares hit a record high of A$12.87 on Jan. 23, but have since dropped 12% to A$11.29 on Thursday as markets have been hit by the coronavirus concerns, after surging about 180% last year.
The company slightly upgraded its full-year forecast for iron ore shipments to the upper end of its previous range of 170-175 million tonnes.
The ramp-up in shipments helped Fortescue cash in on higher iron ore prices after a tailings dam disaster in Brazil curtailed global supply.
The price of 62% grade iron ore in Shanghai SH-CCN-IRNOR62 reached a five-year high of $126.50 in July, before coming off into year end.
The average price Fortescue received for its iron ore during the quarter rose 58% from a year earlier to $76 per dry metric tonne. The company’s mix of higher grade products allowed it to get 86% of the premium 62% Platts benchmark, against 89% in the previous quarter.
Cash production costs for the quarter came in at $12.54 per wet metric tonnes, below $13.02 in the same period last year.
Fortescue lowered its forecast for full-year costs to $12.75-$13.25 from $13.25-$13.75 previously.
In a separate statement, the miner said it was investing $450 million to provide low-cost power to its mine sites in Pilbara. (Reporting by Nikhil Kurian Nainand and Rashmi Ashok in Bengaluru, and Melanie Burton in Melbourne; Editing by Richard Pullin and Muralikumar Anantharaman)