March 27, 2018 / 12:36 AM / 2 years ago

Fortescue cuts iron ore price outlook as Chinese production slowdown, trade tensions weigh

FILE PHOTO - The logo of Fortescue Metals Group adorns their headquarters in Perth, Australia, November 11, 2015. REUTERS/David Gray/File photo

(Reuters) - Australia’s Fortescue Metals Group (FMG.AX) on Tuesday cut its price guidance for iron ore sales for the year to end-June 2018, citing subdued construction activity in China, some ongoing steel production restrictions and global trade worries.

Fortescue amended its guidance to around 65 percent of the average benchmark Platts 62 CFR index, due to a slower than anticipated recovery in contractual realizations.

It said its iron ore sold at 68 percent of the Platts index in the first half of fiscal 2018.

China has been switching to higher grade, less polluting iron ore in a bid to reduce winter smog, boosting demand for premium ore, much of which comes from Brazil.

Fortescue’s first-half 2018 profit fell 44 percent due to weak prices for its lower quality iron ore.

“As market conditions stabilize, price realization as a percentage of the Platts 62 CFR index is expected to increase,” Fortescue said on Tuesday.

“This view is supported by an expectation of strengthened demand for lower iron content ores as steel mill margins moderate and end users look to lower their raw material input costs.”

Fortescue shares fell 3 percent in morning trade to touch a 19-month low at A$4.47, compared with a 0.6 percent gain in the Australian benchmark

Reporting by Ambar Warrick in Bengaluru; editing by Richard Pullin

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