Fortescue profit hit by China demand, 60% iron content product to be launched in FY19
China’s demand for higher grade iron-ore has hit Australian miner Fortescue’s pocket hard, with the company on Monday reporting that its net profit had more than halved in the 2018 financial year, ended June 30.
Fortescue’s net profit after tax decreased from $2.09-billion in the 2017 financial year, to $878-million in the 2018 financial year. The substantial drop was owing to the lower average price received for the company’s product, as high steel mill profitability in China incentivises the use of higher iron content ores to maximise production.
Fortescue received $44 for a dry metric tonne (dmt) in 2018, compared with $53/dmt in 2017. The miner realised 64% of the average Platts 62 CFR index price in 2018, compared with 77% in the previous year.
As a result, revenue decreased by 18% to $6.89-billion, from $8.45-billion in 2017.
In response to the changing market situation in China, Fortescue will be launching a new 60% iron-content product in the second half of the 2019 financial year, CEO Elizabeth Gaines reported.
The product, which will be named West Pilbara Fines, will initially be produced from existing operations, while the company advances the development of the Eliwana mine and rail project. The $1.27-billion project gained board approval in May, and will enter into production in December 2020.
During 2018, Fortescue shipped 170-million tonnes and achieved a record low C1 cost of $12.36 a wet metric tonne (wmt). The firm has guided shipments of 165-million to 170-million tonnes for 2019, at a C1 cost of $12/wmt to $13/wmt.
The board declared a fully franked dividend of A$0.12 a share, bringing its total dividends for 2018 to A$0.23 a share.
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