FMG 0.66% $16.61 fortescue metals group ltd

fortescue to boost iron ore production

  1. 216 Posts.
    Fortescue to boost iron ore production
    10/11/2008 5:46:01 PM
    Fortescue Metals Group Ltd will increase its production rate of iron ore fines to meet rising Chinese demand for that form of the bulk commodity, as the Asian superpower's need for the lump form wanes.

    Fortescue on Monday brought forward a shutdown of its Pilbara port and mine processing facilities by a fortnight under an optimisation program that will allow it to produce fines more quickly.

    Demand for lump has been strong until recently but Chinese steel mills are being increasingly geared for fines in recognition that much of the most easy accessible lump material has been mined.

    The steel mills anticipate that iron ore miners will produce more fines in the future.

    Iron ore miners are being forced to react quickly and creatively to the rapidly changing market, as prices fall due to oversupply and weak demand - conditions broker DJ Carmichael expects to continue to early 2009.

    The broker said stockpiles at Chinese ports sits at 68.7 million tonnes (Mt) and smaller steel mills are shutting down following a rapid collapse in prices for finished steel products.

    "We would anticipate seeing a resurgence in demand for steel related raw materials in about the second quarter of 2009 on the back of an improved and less volatile market," the broker said in a research note.

    Fortescue recently delayed its plan to expand annual output to 80 million tonnes (Mt) in calendar 2009 and is now targeting the 2009/10 financial year - well timed for the anticipated resurgence in demand.

    Its forthcoming optimisation program will give it capacity to reach 55 Mt per annum.

    The company had previously said it would produce 22 Mt for the six and a half months from mid-May, when it commenced mining, to the end of this calendar year.

    But it said on Monday the planned shutdown would cut calendar 2008 output by 10 per cent to 20 Mt.

    A Fortescue spokesman said the shutdown, commencing November 17, would not impact the company's employment levels because mining and stockpiling would continue at full pace.

    IG Markets research analyst Ben Potter said Rio Tinto Ltd was also considering a temporary processing plant shutdown after announcing Monday a 10 per cent cut to its annual iron ore production.
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