Fortescue Metals Group triples profit, sees strong China demand
Fortescue Metals Group (FMG) posted a record profit and bumper dividend, and said it was still seeing solid demand growth for iron ore despite trade tensions between China and the United States.
Thanks in part to a surge in iron ore prices, FMG posted a record profit of $3.19 billion which is almost three times higher than last year, Reuters reported. The company also doubled its final dividend to A$0.24 per share from its payout last year.
Fortescue joins rival Australian iron ore miners Rio Tinto and BHP in reporting bumper profits after a mine disaster in Brazil early this year created a global shortfall and sent prices for the steel-making raw material soaring.
Rio Tinto delivered a record payout while BHP Group posted its biggest profit in more than five years but flagged headwinds due to global growth concerns.
“We have seen the announcements even over the last few days, and tariffs commentary. And it does cause volatility in markets,” said Fortescue Chief Executive Elizabeth Gaines.
“What underpins our confidence in the outlook is that we have seen China’s steel production up 9 percent in the first seven months of the year and we are still seeing strong demand for our products,” she said.
China has been raising stimulus measures to offset a slowdown in economic growth hampered by trade tariffs. The trade dispute intensified after both sides leveled more tariffs on each other’s exports.
“We are certainly seeing the investment in infrastructure continue to underpin that strength in demand,” Gaines said.
Still, China’s breakneck rise in steel production may slow in the second half due to seasonal measures to contain air pollution and ahead of China’s 70th anniversary celebrations, she added.
Benchmark iron ore prices have come off steeply in recent weeks, falling nearly 30 percent since the end of July as some Brazilian production has come back on line and as global demand worries have intensified.
Fortescue, meanwhile, has been ramping up production of its higher grade products as customers seek to use better quality ore to lower emissions.
The average price Fortescue received for its ore in the financial year jumped 48 percent from a year earlier to $65 per dry metric ton.
Photo courtesy of Fortescue Metals Group.