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Fortescue hopes China demand will revive Vale interest in iron ore tie-up

Australian iron ore miner Fortescue Metals Group said it hopes strong demand from China will eventually help revive stalled talks with rival Vale SA about blending their ore in the world's top consumer of the steelmaking raw material.

By: | Dalian (china) | Published: September 22, 2016 12:32 PM
Australian iron ore miner Fortescue Metals Group said it hopes strong demand from China will eventually help revive stalled talks with rival Vale SA about blending their ore in the world's top consumer of the steelmaking raw material. (Reuters) Australian iron ore miner Fortescue Metals Group said it hopes strong demand from China will eventually help revive stalled talks with rival Vale SA about blending their ore in the world’s top consumer of the steelmaking raw material. (Reuters)

Australian iron ore miner Fortescue Metals Group said it hopes strong demand from China will eventually help revive stalled talks with rival Vale SA about blending their ore in the world’s top consumer of the steelmaking raw material.

The world’s No. 4 and No. 1 miner announced in March that they were in talks to blend up to 100 million tonnes of their ore in China. The aim was to match the quality of the ore produced by rival Rio Tinto , seen as the benchmark in China, and win a bigger market share.

The talks have since slowed down significantly and “Vale has expressed that they are less enthusiastic at the moment”, Fortescue Chief Executive Nev Power told Reuters on Thursday.

“Presumably they have higher priorities in the short term. Ultimately the need for it will be there and we think that interest from customers will bring it back,” he said on the sidelines of an industry conference.

China’s growing steel output has driven its demand for iron ore after weaker prices over the past three years curbed ore production at home. Imports of the steelmaking ingredient rose 9.3 percent to 669.65 million tonnes in the first eight months of 2016 from a year ago.

An official from Vale said discussions about blending ore were ongoing, but added that it was a “very complex deal”.

“We are progressing, discussing. It’s not something that is easy to implement,” said Claudio Alves, global director of marketing and sales at Vale.

The plan to blend their ore could make material from both Fortescue and Vale more attractive for China’s mills, improving and adapting quality at lower costs, Chinese steel players and traders have said.

Fortescue remains on track to meet its iron ore production cost target of $12-$13 per wet tonne for fiscal 2017, Power said. The miner in July cut it cost target for the period to that range from a fiscal 2016 average of $15.43 a tonne, taking it closer to bigger rivals.

Spot iron ore prices, which have risen this year after a three-year decline but whose upside has been largely capped at around $60 a tonne are likely to remain stable at current levels along with China’s annual crude steel output of around 800 million tonnes, he said.

“Most of the new supply projects have now been completed, therefore, provided demand stage is relatively stable we should see continuation of that price stability,” Power said.

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