Fortescue Metals chief executive Elizabeth Gaines says China’s commitment to urbanisation and development will underpin iron ore demand and Australia’s recovery from the COVID-19 pandemic.
Ms Gaines said steel inventories that built up in the March quarter were being drawn down as the weather improved in China.
Steel makers were forecasting growth of between 2 per cent and 4 per cent when she visited China early in 2020.
Ms. Gaines told the Macquarie Australia Conference it was difficult to predict where the growth rate might end up given the prospect of additional stimulus.
China’s crude steel production reached 234.5 million tonnes in the first three months of calendar 2020, up 1.2 per cent on the same time last year.
FMG Fortescue Metals Group
“We do anticipate a steady recovery in China’s economic activity and we remain confident in the ongoing commitment to urbanisation and development which will continue to underpin long-term iron ore demand and support WA and Australia’s economic recovery post COVID-19,” Ms Gaines said.
“However, as we are all well aware the global economic outlook does remain uncertain given the impact of the virus on the major economies of the world, including the US, UK and Europe.”
Iron ore stockpiles held at Chinese ports have dwindled from a peak of about 160 million tonnes in March 2018 to about 116 million tonnes on the back of supply disruption out of Brazil and to a lesser extent WA’s Pilbara region.
Fortescue has lifted the company’s iron ore export target for fiscal 2020 to between 175 million and 177 million tonnes as prices remained strong. It was already on track to achieve record shipments despite COVID-19.
Ms Gaines said the steel making outlook was not so rosy in smaller markets like Japan and Korea, where there had been significant impact from the pandemic.
“We know the industry in both those countries has been suffering,” she said.
Fortescue expects its growth projects in the Pilbara, the new Eliwana mine and Iron Bridge magnetite project, to create some 5000 jobs in WA over the next two years.
Ms Gaines said she was confident WA authorities would approve Fortescue’s application to boost export capacity from Port Hedland by 20 per cent to 210 million tonnes a year.
This is on top of a BHP bid to increase its capacity from 290 million tonnes a year to 330 million tonnes a year.
Gina Rinehart’s Roy Hill and Chris Ellison-led Mineral Resources also have plans to increase exports by tens of millions of tonnes a year.
The Pilbara Port Authority told The Australian Financial Review in February that recent dredging had created the potential for a 100 million tonne-a-year boost in iron ore exports from Port Hedland to a maximum of 617 million tonnes.
Ms Gaines said Fortescue’s application to increase export capacity wouldn’t have come as a surprise to the WA government given the Iron Bridge project was intended to add 22 million tonnes a year to supply and scheduled to start production in mid-2022.
Asked if Fortescue had any interest in lithium acquisitions, including the share in the Greenbushes mine now up for sale, Ms Gaines said the company remained interested in the sector but was more focused on copper exploration projects now on hold because of COVID-19 .
“We have drilled for lithium in the Pilbara but we didn’t find anything of scale,” she said.