PERTH (miningweekly.com) – Iron-ore major Fortescue Metals has cut its price expectations as Chinese construction activities are subdued and temporary steel production restrictions remain in place.

The company on Tuesday amended its iron-ore price guidance to about 65% of the average benchmark Platts 62 CR index price, compared with the first half revenue realisation of 68%.

Revenue realisation for the full-year ended June remains subject to movements in the Platts 62 CFR index price and associated mark-to-market adjustments, the miner said.

In the first half of the year, Fortescue’s revenue fell by 18% to $3.68-billion and net profit slumped 44% to $681-million, owing to the price discount on the lower grade ore that the miner produces.

China’s steel mills have been turning to higher content ores, such as the product that Vale and Rio Tinto produce, to reduce emissions.

Fortescue noted that price realisations as a percentage of the Platts 62 CFR index were expected to increase as market conditions stablised. This view was 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.

Meanwhile, the ASX-listed company on Tuesday also announced that it would redeem $1.55-billion of senior secured notes due in 2022.

The combination of proceeds from the $1.4-billion term loan, signed in February this year, and the issue of $500-million senior unsecured notes in March and $100-million cash, enabled the repayment of $2-billion of the outstanding balance of notes.

Fortescue told shareholders that the remaining balance of the notes, which was worth some $160-million, would be retired from operating cash flows.

“Completion of our refinancing strategy is another important milestone for Fortescue. The successful implementation of this strategy reduces total debt and at the same time delivers a flexible, low-cost capital structure for the business,” said company CFO Ian Wells.

On completion, the combination of refinancing and debt repayment will lower borrowing costs by about $130-million a year.