China’s demand for iron ore is still strong, says Fortescue boss Elizabeth Gaines | The Business

China’s demand for iron ore is still strong, says Fortescue boss Elizabeth Gaines | The Business

elizabeth gaines welcome to the business and congratulations on the result oh great to be with you catherine and thank you very much a very strong result for fortescue driven by the iron ore price and record shipping volumes just how long do you expect this demand for iron ore to last while we continue to see very strong demand for iron ore and you’re right we did optimise the market conditions in the financial year 21 we shipped 182.2 million tons of iron ore we’re a low-cost producer and as you can see from our results with a 10.3 billion dollar net profit after tax which is up 117 we’ve cut we’ve certainly optimized the current market conditions in terms of the current market we still see strong demand for iron ore whilst we’ve seen some slow down include steel production in china it is still up eight percent compared to last year for the seven months ended 31 july so we’re continuing to see strong demand for iron ore the current benchmark price is around 157 dollars a ton and for the financial year that we just reported the average for the full year was around 154 dollars a ton so we’re still actually a bit higher than the average for all of fy21 so we’re continuing to focus on the things that we can control we’ve guided to a range of iron ore shipments of 180 to 185 million tons this year a low c1 cost and will continue to generate very strong margins regardless of where we are in the cycle well elizabeth we’ve seen the iron ore price tumble almost 40 in the last two months china has declared a tougher stand on emissions and output out of brazil is ramping up how will this impact on fortescue margins and are you confident that they can be maintained well we continue to generate very strong margins regardless of where we are in the cycle we know this is a cyclical industry and whilst iron ore prices have moderated from a high of around 230 dollars a ton at the current levels of 157 dollars a ton that’s still above the average for all of financial year 21 against which we’ve just reported record profits of 10.3 billion dollars so we’re in a very strong position we are a low-cost producer and that’s critical as you as we go through the cycles being a low-cost producer and having an industry-leading cost position means that we can actually generate very strong margins throughout those cycles and actually over the last five years our average ebitda margin per ton has been fifty dollars now for the financial year that we reported today it was 99 so clearly that’s a very high margin but the average over five years is fifty dollars a ton and that has generated enormous shareholder value we’ve paid out seventy percent of our overall impact over the last number of years in uh in dividends to our shareholders and for the year that we’ve just reported we’ve paid out 80 percent and that is a total dividend of 3.58 cents a share and is an outflow of 11 billion australian dollars to our shareholders just before i move away from the iron ore story here where do you think china is heading with respect to demand for iron ore well we continue to see strong demand for iron ore from china crude steel production for the seven months to the end of july is up eight percent we think there’ll be some moderation this year it may not land at eight percent increase year on year for this calendar year but we do expect that crude steel production will still be slightly above last year and against that backdrop we still continue to see very strong demand for iron ore we do expect also a uptick in terms of crude steel demand in the fourth quarter of this year as construction activities improve and increase you announced today that you’ll be providing information shortly on targets for scope 3 emissions essentially the pollution from your customers dr forrest today said that setting these targets without a strategy on how you can help your customers decarbonize is pointless so it follows that you must now have or at least a very close to a strategy can you elaborate on how you plan to help your customers decarbonize and what challenges you’ve faced well we’re already on a pathway to be carbon neutral by 2030 so that’s in our own emissions so scope one and two but if fortescue is carbon neutral that means we’re actually producing iron ore that is free of emissions so that in itself in itself will be a big contributor to the reduction in scope 3 emissions for that iron ore that’s used by our customers and we expect we’ll get a premium for that product because it will be carbon neutral so that’s a big contribution we’re also looking at green iron and we’ve invested in research and technology on the production of green iron again another potential contributor to that reduction in scope 3 emissions and some of the work we’ve been doing on green fleet is testing the use of ammonia for shipping fuel and shipping is actually also a significant contributor to scope 3 emissions so replacing diesel with green ammonia for shipping as well as our own goal to be carbon neutral and producing green iron all of that will contribute to reduction in scope 3 emissions and is a really practical pathway it’s not a object you know sort of subjective pathway without knowing how we’re actually going to achieve it we know that there are a number of key pillars whether that’s the reduction in shipping emissions whether it’s production of green iron or also our own product being emissions they they will all contribute significantly to reduction in scope 3 emissions well we know that green hydrogen is a huge part of fortescue’s future but in order to commercialize green hydrogen there’s a common view that government investment is critical is our government doing enough to support this goal and can you do it without any of this sort of investment well business is getting on with the uh with the challenge of tackling climate change and there is no doubt and fortescue’s i think leading the way in australia in terms of our views on the opportunity for green hydrogen not only as a way to decarbonize our operations but also the creation of a significant export market i think you know government we need the right settings in place we need policies that support this investment we’re ready and willing to make these investments and i really do think that business is getting on with it i think government has been slower to respond uh there is sort of quite a lot of activity underway and certainly in western australia there is now a minister for hydrogen so there is a recognition that this is a significant opportunity for australia but we need business and government to work together to make sure that we can optimize this opportunity because it is a generational opportunity to create a new export market for australia for the benefit of all australians so elizabeth what government policies and leadership strategies do you need to achieve your environmental goals well we need strategies and policies that support uh the the introduction of large-scale renewable energy whether that’s on past releases here in western australia whether that’s other regulatory support as well so there are manufacturing opportunities there’s renewable energy opportunities and all of that needs government and business working together because we still need to get the relevant approvals we need to know that we can use the land for that purpose so there’s a great opportunity here i think that there is a recognition that this is a significant opportunity we just need to accelerate because we’re moving at pace we’ve set a very ambitious target to be carbon neutral by 2030 so to achieve that we actually need to be making these investment decisions today and we need to have the right support so that we can actually either use the land or install manufacturing capabilities and there’s a range of different approvals that are required to see this vision through to reality we just want that to happen at the same pace that we’re willing to invest onto the pandemic fortescue has rapid antigen testing across some of its mine sites i believe if the supply of the covert vaccine was not an issue and it was available to everybody would the company mandate vaccination for staff well we haven’t made a decision on mandating vaccination i mean our view is rapid antigens really key so we’re testing everybody before they go to site so it’s going to be a combination of testing and obviously vaccination is key as well but we don’t know the vaccine hesitancy rate yet because vaccination hasn’t been readily available to our entire workforce so we’re going to to work with the workforce we know part of our culture is you know strong focus on safety looking out for our mates and ourselves and by doing that that would actually support our team members getting vaccinated so we’ll wait and see we’ll wait and see what the vaccine hesitancy rate might be but we’re really focused on making sure that we protect everybody who works at fortescue and rapid antigen testing is also key to that protection and just on your view on the economy we know that the lockdowns in new south wales and victoria have caused some experts to look at the possibility of a contraction in gdp for next quarter what’s your economic outlook uh look the resources sector continues to make a very significant contribution to the west australian and the australian economy uh we continue to see very strong demand for our products we’re generating significant export revenue royalties taxes employment uh the you know the ongoing restrictions can make you know have caused some challenges with some of our team members who do reside on the east coast we’re working with them and supporting them whether they want to temporarily or permanently relocate to western australia there’s no doubt it’s causing some challenges but the sector that we’re in we’re continuing to see very robust demand and generating those you know that very strong economic support for the nation elizabeth gaines great to talk to you thank you for joining us thanks catherine you
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China\'s demand for iron ore is still strong, says Fortescue boss Elizabeth Gaines | The Business

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