• Fortescue Metals Group hits record iron ore exports of 189Mt, with potential to grow to 192Mt in FY23
  • Costs continue to rise amid high inflation and competition for labour, lifting from US$15.91/t in FY22 to US$18-18.75/t in FY23
  • Outgoing FMG boss Gaines says the company hasn’t had any discussions yet with new “centralised iron ore buyer” set up by Chinese govt

Fortescue Metals Group (ASX:FMG) is eyeing yet another iron ore record after beating guidance with a record 189Mt for FY22.

FMG, which recently applied to WA authorities to increase its hematite shipping capacity from Port Hedland from 188Mt to 210Mt, expects to ship 187-192Mt in FY23.

That will dovetail with the first output from its Iron Bridge magnetite mine in the March quarter, with FMG expecting to ship 1Mt of the super-premium product in FY23.

The US$3.6-3.8b mine will have a total production profile of 22Mt once fully ramped up.

FMG expects to spend US$2.7-3.1b on capex at its iron ore operations including Iron Bridge and the Pilbara Energy Connect project with US$600-700m to be spent in its FFI green energy division on top of that.

The company saw price realisation against the headline 62% Fe iron ore price increase from 70 to 78%, with average prices lifting from US$100/dmt to US$108/dmt despite a slight drop in the average Platts 62% price across the quarter.

‘I’ve learnt never to underestimate the Chinese economy’s ability to achieve targets.’

However, FMG saw costs lift by 14% to US$15.91/wmt at its flagship Pilbara iron ore hub in FY22 and expects to see costs lift by as much as 17.9% in FY23, with C1 cost guidance of US$18-18.75/wmt after C1 costs hit US$17.19/wmt in the fourth quarter.

“We’re all seeing the impact of inflation, you can see that in the cost guidance we’ve released today,” Gaines told journalists on a media call following the release of the results.

“If we look at our own operations we need to work very hard to keep our costs low, we know that the market is cyclical as well, we’re seeing strong demand for our products.

“But we have to maintain our costs and be innovative to make sure we keep our costs low.

“Inflation is real, we saw the release of the inflation data this week with national inflation at 6.1%, but with Western Australia it’s closer to 8% so we’re certainly feeling the impacts of inflation here.”

Gaines said there’s been no change to the demand profile for skilled labour, a shortage of which has been highlighted by a host of WA-focused miners this reporting season.


Fortescue Metals Group (ASX:FMG) share price today:



Chinese demand for iron ore remains strong

Much of the column inches in iron ore reporting in recent weeks has been taken up by news about China’s latest attempt to rein in prices with the formation of a centralised iron ore buyer called the China Mineral Resources Group.

Gaines said FMG was watching the development closely but hadn’t had any direct engagement.

“We continue to take a very market-based approach which is focused on our customers,” she said.

“Our view is that prices will ultimately be determined by supply and demand for iron ore.”

Gaines said the company expects Chinese crude steel production, which fell 6.5% to 527Mt year on year in the first half, to remain flat year on year around the 1Bt mark.

“Our view would be that we would still anticipate that crude steel production in China this year would approach a billion tonnes, which is largely in line with the last couple of years,” she said.

“We know the Chinese government have recently announced some potential support for property development as well as an intention to invest in sort of shanty town developments and revitalisation of previous shanty towns.

“(There is) a lot of speculation including from the IMF as to whether China will achieve its GDP growth target this year. I’ve learnt never to underestimate the Chinese economy’s ability to achieve targets.

“Our view is that crude steel production will be pretty flat year on year and that will be our expectation.”