FMG hits new low as iron ore falters
October 10th, 2008 | by mantrionline |Shares in West Australian iron ore companies have fallen lower in early trade after Mount Gibson Iron admitted some of its customers had asked for its Mid West iron ore shipments to be delayed because of slowing demand amid the global turmoil.
The news from Australia’s fifth-biggest iron ore producer has been interpreted by jittery share market investors as further signs of an economic slowdown in China and a sharp decline in demand for raw materials.
Shares in Mt Gibson fell 14.86 per cent in early trade, down 13 cents to 74.5 cents at 7.43am, while shares in Fortescue Metals Group hit a low of $2.78 after falling 52 cents from yesterday’s close.
The fall represents a drop of $10 per share from its $12.78 closing price of June 24 this year and is the giant’s lowest trading price since its closing price of $2.72 on August 16 last year.
Fortescue, as well as BHP Billiton and Rio Tinto, was last night quick to claim its own shipments were unaffected by the changes, although there were some suggestions Chinese customers may be becoming increasingly selective about the quality of the products they are receiving.
Also lower this morning was Gindalbie Metals, down 20.88 per cent or 9.5 cents to 36 cents, and Murchison Metals, down 12.5 cents or 14.2 per cent to 75.5 cents.
A Murchison Metals spokesman said one of its smaller customers had asked for a delay to shipments last month but said the ore had been “snapped up” by the bigger mills.
Gindalbie chairman George Jones last night described the market savaging as “unbelievable” but denied any problems with the miner’s Karara project, or its relationship with Chinese off-take partner Ansteel.
“There is no reason to believe that they (Ansteel) will not proceed with our project,” Mr Jones said.
Mt Gibson would not comment beyond a brief statement.
“Customer and iron ore sector analysts indicate a slowdown in demand for iron ore in China due to current economic uncertainty and the tightening of credit facilities, leading to reductions in steel production and the current significant build-up of iron ore stockpiles at Chinese ports,” Mt Gibson said.
Although Mt Gibson said it had no obligation to meet its customers’ requests, given they are locked into long-term contracts, it said it hoped for an “acceptable accommodation”.
Analysts said there could be more bad news if the crisis started to hurt the bigger mills, which underpin demand for bigger iron ore miners.
The latest development comes after a handful of analysts dropped their forecasts for next year’s benchmark prices. Iron ore prices have increased fivefold since 2001 but spot prices have fallen more than 40 per cent from the peak. It is also bad news for the next wave of producers.
North West Iron Ore Alliance chairwoman Megan Anwyl said its members – Atlas Iron, FerrAus, BC Iron and Brockman Resources – continued to forge ahead with plans regardless of the global turmoil.
Also yesterday a temporary injunction that may have prevented Fortescue from dredging certain sections of the Port Hedland harbour as part of its expansion plans expired.
