FORTESCUE Metals Group shares have dropped eight per cent after the iron ore miner suffered an 88 per cent slide in its full year profit. Fortescue will hold volumes steady this year, although it was ready to expand if demand revived, Forrest said.
“The result showed a significant impact from the fall in the iron ore price over the year”, David Lennox, an analyst at Fat Prophets in Sydney, said by phone.
The scaling back of BHP’s China steel (Taiwan: 2002.TW – news) forecast leaves Sam Walsh, the chief executive of rival Rio Tinto (LSE: RIO.L – news), as one of the last holdouts for a peak above 1 billion tonnes.
“The steel sector has entered its usual winter mode as demand for downstream products sees slowing growth, competition intensifies and environmental requirements become more stringent”, Baosteel said. “Things are shaky to the extent where all the progress we’ve made in the past years looks to have been erased”, said Howie Lee, analyst at Phillip Futures in Singapore, on the rout in risky assets. Prices may lose a further 30 percent over the next 18 months, according to Goldman Sachs Group Inc.
Iron ore has retreated this year in line with raw materials from crude oil to copper amid concern that China’s slowdown will undermine demand, spurring gluts. Price declines weighed on commodity producers, with the Bloomberg World Mining Index losing as much as 7.5 per cent.
But its is also worth asking the question: what is the next logical step for companies like BHP, the world’s largest miner, once they acknowledge that Chinese steel output will fall short of their prior forecasts?
This will likely give Mackenzie room to argue that the strategy of maximising low-priced output in a bid to force higher-cost miners from the market still makes sense, even if demand growth for iron ore is muted.
The price of iron ore at the Port of Qingdao slumped 5 per cent to $US53.28 per cent on Monday as a savage sell-off gripped Asian markets.
Net profit in the six months to June 30 rose 0.65 percent year on year to 3.17 billion yuan ($495.1 million), the company said in a filing on the Shanghai stock exchange. “When the market turns and does require additional iron ore, we will be there, fast and inexpensively”.