* Fortescue lifts quarterly iron ore output 43 pct
* Warns heavy rains could dampen 2nd half shipments
* Says switch in China to more imported ore supporting price
By James Regan
SYDNEY, Jan 30 Fortescue Metals Group
on Thursday said it saw a rise in demand for its iron ore in the
December quarter after posting a 43 percent rise in quarterly
output, but warned production in the full year could be
disrupted by bad weather.
Total shipments rose to 28 million tonnes in the quarter
ended Dec 31, up from 19.6 million a year ago and 25.9 million
the previous quarter, Fortescue said, in line with analysts'
"In the markets we are continuing to see strong demand from
our customers across Asia and particularly China, with a net
realised price of $125 a tonne, up from $121 a tonne in the
previous quarter," Fortescue Chief Executive Nev Power said.
The world's fourth-biggest iron ore producer also revised
fiscal 2014 shipments ending June 30 to the lower end of
guidance at 127 million tonnes, citing interruptions caused by a
cyclone in late December and heavy rains at its mines since
"Obviously guidance is dependent on weather and we have
experienced some significant delays, with a very wet January,"
Power said. "We've had extremely heavy rainfall at a number of
The company's main Cloudbreak mine was saturated with 500
millimeters of rain over a single week, he added.
Fortescue's drive to lift production comes as its main
market China is tipped by some to weaken, raising questions over
iron ore's continued resilience as other commodities crumble.
A Reuters poll suggests iron ore prices are set to test
five-year lows after hitting a six-month trough in January, as
rising global supply combines with slower growth in Chinese
But Power said data showing Chinese imports of iron ore
growing at 10 percent last year against 8 percent growth in
steel production, pointed to rising demand from the seaborne
market, and supporting prices.
"The stability we have seen in the iron ore price reflects
the increased seaborne supply replacing the higher cost domestic
production (in China)," Power said.
"As the supply curve continues to flatten and the new
low-cost production, such as ours, comes on stream, we expect to
see increased stabilisation in prices," he said.
Australian miners are in the midst of multi-billion dollar
expansion work to dig hundreds of millions more tonnes of ore in
the next few years.
Rio Tinto and BHP Billiton lifted December
quarter output 7 percent and 16 percent respectively.
Power sees the best defence against a sharp drop in iron
prices in cost cutting. The company is adding to a fleet of
driverless trucks to cut its payroll and is in talks with other
miners to piggyback on its extensive rail haulage lines in the
Pilbara iron ore belt.
Production costs remained reasonably steady at around $33 a
tonne in the last quarter, and the company has cut full-year
costs guidance to $34 a tonne to reflect a fall in the value of
the Australian dollar, he said.