Fortescue Metals Chief Sees Opportunity in Iron Ore Future

Despite the company’s 23 percent fall in share price on Wednesday, Fortescue’s chief Nev Powers still sees immense opportunity in iron.  

The Australian-based iron ore miner made record shipments of the steelmaking ingredient in the March quarter with 31.5 tons, up by half from the last time last year.  Powers isn’t concerned about market shares and said short-term factors were behind the falls, and Fortescue was “continuing to focus on improving our cost position …I’m not at all concerned about where the price is.”

Powers believes China’s demand for steel is still strong regardless of price volatility. The China steel company Baosteel recently issued a big vote of confidence in iron ore by lobbing a joint $1.42 billion bid this week for Perth junior Aquila Resources.

According to Powers, the bid was reaffirming and a positive one and highlights revived Chinese interest in the Australian resources sector. ''It shows a lot of confidence by China in the Pilbara and in Australia generally. There has been concern for a while about the level of investment China has made in the iron ore industry … this shows a change to that policy and I think it is very positive,'' Power said.

China’s economy began rather slow at the start of the year according to official figures, but was still stronger than expected.

“What we’re seeing already in this first quarter of 2014 is continuing strong growth n iron ore demand from China, so at the moment it’s continuing to absorb any increase in supply,” Powers said.

The company has also begun exploring additional options, including supplying customers in South Korea, Japan and other Asian markets.

In addition, the company’s repayment of debt as well  as operational and scale efficiencies have reduced the company’s break even cost, meaning it can absorb more fluctuations in the iron ore price better than last year.

Last month Fortescue completed its $9.2 billion mine expansion, allowing it to produce its long held target of 155 million tons of iron ore a year.