News

Steel lobby sure FMG won't skip talks next year

By Zhang Qi (China Daily)
Updated: 2009-10-14 08:07

Fortescue Metals Group (FMG), Australia's third-largest iron ore miner, is unlikely to skip next year's iron ore talks with the nation's steelmakers despite not receiving necessary financing from Chinese investors for its expansion plans, a steel industry lobby official said Tuesday.

"FMG could be involved in next year's iron ore talks since the game rules between Chinese steelmakers and the three global iron ore giants have changed," said Luo Bingsheng, vice-president of China Iron & Steel Association (CISA). FMG couldn't be reached for comment.

The Australian miner will also likely stick to its promise of exporting iron ore to China at a price lower than what Rio Tinto and BHP are offering despite the failed bid to secure financing, he said.

FMG reportedly exported 9.35 million tons of iron ore in the third quarter, up 19 percent from the previous quarter.

"The rising business volume may net FMG abundant funds to support its expansion plans," said Xu Xiangchun, a senior analyst at consultant firm Mysteel.

FMG settled the iron ore price agreement for the second half of this year with CISA in August with a 3 percent lower discount than what Rio and BHP offered to Asian steel companies.

In return, China was expected to provide FMG with $5.5 billion to $6 billion to help it expand production.

However, after the final deadline for negotiations, FMG did not reach any agreement with Chinese investors.

CISA's Luo said the long-term contract settled by China's steel enterprises and FMG was separate from any other financial agreements.

On Monday, FMG Chief Executive Andrew Forrest said the company could self-finance its plan to more than triple annual output to about 95 million tons.

The World Steel Association warned recently that China's steel demand growth could drop to 5 percent next year from 19 percent this year as the impact of the government's stimulus packages gradually slackened.

Analyst Xu Xiangchun said it was still too early to forecast next year's iron ore prices as the timing and the recovery prospects of the global steel industry were still uncertain.