UK Markets closed

Fortescue First-Quarter Shipments Remain Steady as Costs Decline

Jasmine Ng, Perry Williams
An excavator loads ore into an autonomous dump truck at Fortescue Metals Group Ltd.'s Solomon Hub mining operations in the Pilbara region, Australia, on Thursday, Oct. 27, 2016. Shares in Fortescue, the world's No. 4 iron ore exporter, have almost trebled in 2016 as iron ore recovered, and the company cut costs and repaid debt. Photographer: Brendon Thorne/Bloomberg

Fortescue Metals Group Ltd., the fourth-biggest iron ore exporter, reported first-quarter sales remained steady as costs continued to decline.

Shipments were 44 million metric tons in the three months ended Sept. 30, from 43.8 million tons a year ago, the Perth-based company said in a statement on Thursday. That compared to a 43.5 million ton median estimate among five analysts surveyed by Bloomberg.

Iron ore prices have slumped since mid-August as China prepares winter cuts to steel output and as mine supplies from Australia and Brazil continue to rise. Chinese steel output remained at near record levels during the quarter maintaining the strong demand for iron ore, Fortescue said.

More from Bloomberg.com: Inside Apple’s Struggle to Get the iPhone X to Market on Time

“Investing in the long-term sustainability of our core iron ore business, maintaining production, further strengthening the balance sheet and generating shareholder returns remain our key priorities,” outgoing Chief Executive Officer Nev Power said in the statement. Power, who took the post in 2011, is scheduled to step down in February.

Fortescue fell 2 percent to A$4.95 at 10:03 a.m. in Sydney trading.

Cash costs fell 10 percent from the same period a year ago to $12.15 a wet metric ton. That compared to a median $12.34 a ton estimate between four analysts.

Lower-grade material with 58 percent iron content plunged this month to the lowest since 2016 as China’s mills increasingly favor higher-content material, which is more efficient and less polluting, amid a drive to curb pollution and boost air quality. Fortescue products have an average of 58 percent content, according to filings.

More from Bloomberg.com: Flake’s Blistering Attack on Trump Is the Latest Crack in GOP Unity

The company’s average realized price during the quarter was 71 per cent of the benchmark’s $70.90 a dry metric ton. Based on current market prices, Fortescue revised its full-year price realization guidance to 70 percent to 75 percent of the benchmark.

Steel mill profitability has remained at historically high levels and continues to incentivize blast furnaces to maximise production, thereby supporting the premium for higher grade iron ore, Fortescue said. “This has maintained the spread in prices between iron ore grades and these are expected to remain in the near term,” it said.

More from Bloomberg.com: Donald Trump Courted a Republican Rebellion. Now He’s Got One

More from Bloomberg.com

Read Fortescue First-Quarter Shipments Remain Steady as Costs Decline on bloomberg.com