NewsBite

Iron ore price lifts as Fortescue profit surges

The iron ore price has inched higher, as Fortescue Metals Group voiced confidence in Chinese demand for the commodity.

Machinery operates in a pit at Rio Tinto Group's West Angelas iron ore mine in the Pilbara. (Photographer: Ian Waldie/Bloomberg)
Machinery operates in a pit at Rio Tinto Group's West Angelas iron ore mine in the Pilbara. (Photographer: Ian Waldie/Bloomberg)

The iron ore price has edged higher, hovering slightly below its recent three-month peak as pure play producer Fortescue Metals Group offered a vote of confidence in the commodity’s outlook.

Iron ore added 0.2 per cent to $US61.10 a tonne overnight, according to The Steel Index, from $US61 in the previous session.

The steelmaking ingredient last week reached a three-and-a-half-month high of $US61.80, and has been hovering at or above $US60 for the last week and a half.

The surprising resilience marks a sharp turnaround from a trough of $US47.90 in early June, its lowest point this year, with prices rallying some 28 per cent in less than three months.

The overnight price increase follows an upbeat full-year report from Fortescue, which tripled its profit and declared its highest dividend ever. The miner has raced to cut costs in recent years in order to compete with larger low-cost rivals Rio Tinto and BHP Billiton.

The unexpected strength in iron ore has provided a boost for major producers during the current earnings season. Although the reports from Rio and BHP were more sombre, a weaker price for the key export could have made their results even worse.

Fortescue chief executive Nev Power expressed confidence in continued Chinese demand as the country embarks on a massive infrastructure stimulus spend. “We continue to see consistent demand for our product from a diverse range of customers across China,” he said.

But his tone is at odds with BHP boss Andrew Mackenzie, who last week called recent iron ore price strength “temporary”.

Several analysts agree with Mr Mackenzie’s view and expect iron ore to slip back to the low $US50s or low $US40s this year and next, although their continued predictions are yet to be proven correct.

In London trade, BHP shares fell 1.9 per cent, while Rio lost 2.4 per cent.

Read related topics:Fortescue Metals

Add your comment to this story

To join the conversation, please Don't have an account? Register

Join the conversation, you are commenting as Logout

Original URL: https://www.theaustralian.com.au/business/markets/iron-ore-price-lifts-as-fortescue-profit-surges/news-story/76d53163ba1cba9464fd8e02e0c01f27