Iron giants to expand operations to feed Chinese demand for high-quality ore

Iron giants to expand operations to feed Chinese demand for high-quality ore

Fri, 21/09/2018 - 10:49

FMG has been a prolific iron ore exporter to China, with its shipments recently passing the 1 billion tonne milestone. Photo: FMG

Iron ore giants Vale, Fortescue Metals Group and Roy Hill are eying expansions of operations and production enhancements in Brazil and Western Australia, hoping to cash in on a growing appetite for higher-grade varieties of the commodity in its top market China.

China, the world's biggest consumer of the steelmaking ingredient, has ramped up buying of higher-quality, less polluting grades of iron ore as it battles to clear its notoriously smoggy skies.

Vale executive director Peter Poppinga said at an industry conference in China that the world's largest iron ore miner was evaluating the expansion of its S11D project in the Amazonian state of Para, even though it was still being brought up to the planned capacity after it was inaugurated in December 2016.

"Given all these quality trends (that are) favourable to us, we are studying to increase the project, but there are no numbers yet," Mr Poppinga said.

Heavy spending on the project, which churns out rich grades of ore, has driven up Vale's debt, coinciding with a sharp slide in iron ore prices.

Mr Poppinga said S11D's iron ore output would be close to 90 million tonnes next year, up from around 60 million tonnes now.

However, he said Vale is aiming to keep its total production at around 400 million tonnes, replacing low-quality iron ore with higher-grade material.

"We think this is a healthy level going forward when you think about margin optimisation," Poppinga said.

"We are not after market share, we are after value and not after volume."

Mr Poppinga said he expects almost 90 percent of Chinese steel capacity will comply with new emission standards by 2025.

Fortescue Metals Group, the world's fourth-largest iron ore producer, is aiming to start producing higher-grade iron ore as well from December as it addresses the widening discount for its lower grade material.

FMG has exported more than 1 billion tonnes of iron ore to China and expects to start shipping a 60-percent iron content product called West Pilbara Fines from December, ahead of the development of its Eliwana mine and rail project.

Initial production volume of West Pilbara Fines would be 10 million to 15 million tonnes a year, FMG chief executive Elizabeth Gaines told Reuters at the conference.

"Once we have Eliwana we can continue to produce West Pilbara Fines at rates of around 40 million tonnes per annum," MS Gaines said.

Fellow Australian miner Roy Hill, controlled by billionaire Gina Rinehart also plans to raise its annual output to 60 million tonnes, from 55 million tonnes, chief executive Barry Fitzgerald said.

Roy Hill, which has been exporting to China since December 2015, produces ore at above the 60 per cent grade benchmark set by China's new-generation steel mills.