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Fortescue sees strong iron ore demand as China churns out record steel

While many of the nation’s other top export commodities such as coal and natural gas have faced sharp falls due to various impacts of the coronavirus pandemic, iron ore has soared and remains above $US110 a tonne, providing a windfall to mining giants such as Fortescue, BHP and Rio Tinto, as well as the federal budget.

Fortescue, whose biggest shareholder is billionaire Andrew Forrest”, revealed on Thursday it had shipped 44.3 million tonnes of iron ore for the September quarter, while its cargoes achieved an average price of $US106 per dry metric tonne across the period, compared to $US85 a year earlier.

Even with the softer winter demand season approaching, Ms Gaines said China was firmly on course to achieve 1 billion tonnes, as the Chinese government appeared focused on continuing to stimulate its economy and urbanise.

“Steel is being consumed, iron ore is also being consumed,” she said. “There is an underlying strength that would support strong demand.”

The price of the commodity has been lifted by resilient demand from China’s steel mills ramping up output to stimulate the economy and softer-than-expected output from overseas iron ore producers, such as Brazil’s Vale. China is by far the world’s biggest consumer of iron ore, buying more than 70 per cent of seaborne cargoes.

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Fortescue’s chief operating officer, Greg Lilleyman, also noted signs of recovering demand from steel mills elsewhere in Asia. “Steelmaking activity is starting to pick up across Japan and Korea recently,” he said.

Analysts said Fortescue’s quarterly operational results were strong and broadly in line with expectations. While some seasonal weakness in the iron ore price was expected over the December quarter, the Royal Bank of Canada’s mining team said the 12-month price outlook remained positive amid resilient Chinese demand.

“We expect FMG will find support from investors given the price environment as well as potential for additional stimulus,” they said.

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