Fortescue warns of iron ore production cuts
- Fortescue warned it may need to cut iron ore production as contract negotiations with China Mineral Resources Group drag on.
- The company's share price dropped 2% to $14.57 following the operational update.
- Fortescue is stockpiling up to 5 million tonnes of ore to resist demands from Beijing's central buying agency.
Fortescue (ASX:FMG) has warned it may be forced to scale back Pilbara operations and miss sales targets if negotiations with China Mineral Resources Group are not finished by the end of 2026.
The potential operational cuts follow orders from China's central procurement agency for local steel mills to halt purchases of a low-grade Fortescue iron ore product during pricing disputes.
"We will look at every single opportunity to stockpile and utilise working capital, but there will be a point where there is just no more room to put our ore," said Fortescue Metals and Operations CEO Dino Otranto.
The miner plans to stockpile 4 million to 5 million tonnes of ore this month while maintaining its 2027 financial year target of 197 million to 207 million tonnes at a cash cost of US$20.50 to US$21. per tonne.
Following the announcement, the Fortescue share price was down at $14.57.
The company shipped 46.8 million tonnes of iron ore during the September quarter, which marked a 6 per cent decline compared to the same period last year.
Fortescue also faced rising unit production costs of US$21.98 per tonne during the quarter due to higher diesel prices stemming from Middle East conflicts.
