Fortescue Metals forging more deals in China
Fortescue Metals says it has $US4bn ($5.5bn) worth of new business with China in the pipeline.
Australian agricultural, coal and copper exporters are still waiting nervously on developments in China’s trade stoush with Canberra, but Fortescue Metals says it has $US4bn ($5.5bn) worth of new business in the pipeline that underlines the fundamental strength of its relationship with the world’s second-biggest economy.
Fortescue said it signed memorandums of understanding (MOUs) covering iron ore sales and procurement opportunities with a raft of Chinese majors, including state-owned steel group — and major Fortescue shareholder — Hunan Valin Iron and Steel, Baotou Iron and Steel, and Dalian Huarui Heavy Industry.
It also signed an MOU for “strategic co-operation” with the Bank of China at the China International Import Expo last week, with the company valuing total business opportunities over 12 MOUs it signed at about $US3bn to $US4bn if they are turned into formal agreements.
Newly released trade data shows that, despite months of trade drama, Australia in 2020 has already achieved its second-highest annual goods exports to China, with two months of the year to go.
Chinese customs data released over the weekend revealed Australia has exported more than $131bn to China in the first 10 months of the year. Almost 60 per cent of that, worth more than $75bn, were exports of iron ore. Total goods exports from Australia were down 4.7 per cent compared to the first 10 months of 2019, the year Australia exported a record $149bn of goods to China, up more than $31bn on the previous record of $118bn in 2018.
Bans on other commodities may still eventuate. Australian coal miners won’t know until the end of the month, when full trade data is released, whether they suffered a big blow when coal shipments were restricted in October after China’s ports reached annual import quotas.
But Fortescue boss Elizabeth Gaines said the strength of the iron ore market showed the relationship between Australian and China was still important and of benefit to both countries.
“Fortescue’s success and that of the Australian economy has been built on the great powerhouse that is China. Now, more than ever, these strong trade relationships provide economic stability as we work together to build new opportunities for the future,” she said.
“The strength in demand for iron ore continues to play an important role in Australia’s economy, growth and development. We are proud to sign MOUs with Valin Group, the Bank of China, steel mills and other procurement partners, demonstrating the breadth and depth of our relationships in China. Through this multifaceted approach, Fortescue has forged strong partnerships with customers and businesses in China that have significantly contributed to China’s remarkable urbanisation and development and our company’s contribution to the economic prosperity of Australia and Western Australia.”
The long-term nature of China’s interest in Australian mining majors was also underscored by BHP’s announcement on the weekend it had signed an agreement with China’s biggest steelmaker, state-owned Baowu, to spend $US35m over five years on research to curb carbon emissions from the steel industry.
There was a relief rally on Monday across ASX stocks caught up in the mooted ban of Australian imports.
Australia’s most China-exposed wine stock, Treasury Wine Estates, rose almost 3 per cent, while copper miners Oz Minerals and Sandfire Resources both closed up almost 2 per cent.
“As of today, we’ve had no customer deferrals,” said a spokeswoman for Oz Minerals on Monday.
“TWE has no additional insights to provide at this time,” said Treasury.
Sandfire, which took a 7 per cent hit to its share price last week on rumours of the China copper ban, said it had also seen no sign the mooted restrictions had materialised.
Sandfire’s DeGrussa operation in Western Australia was continuing to operate at full production with sales of copper concentrate continuing. “Sandfire maintains regular contact with its key customers and concentrate trading and smelter partners both in China and other markets.
“As advised last week, Sandfire is able to increase sales volumes to its concentrate customers in well established and robust non-Chinese markets as and when required with minimal impact on our business.“
On Monday Trade Minister Simon Birmingham warned Beijing Australia would take action at the World Trade Organisation if exports were unfairly stopped from entering China.
“In terms of the actual practicalities of trade flows into China we have been monitoring very closely over recent days the flow of certain goods,” he told the ABC.
