Fortescue Metals Group, one of the “big three” Australian iron ore miners, is expanding its customer base beyond China as global investors fret over how a slowdown in Chinese economic growth will affect steel demand.
Nev Power, Fortescue’s chief executive, said the company was supplying some customers in South Korea, and wanted to trial iron ore sales to Japan and across Asia.
“We will keep an open mind as other economies such as India develop. The Taiwanese are developing a steel mill in Vietnam so there is starting to be diversification. I think there are opportunities for us,” he said.
The price of iron ore – used in steelmaking – suffered one of its biggest one-day falls in March over fears that a cooling Chinese economy would damp demand for the raw material at a time when production reached record highs.
Iron ore prices fell again last week following a warning by Vale, the Brazilian miner, that supply had outstripped demand for the first time in a decade due to softening China demand. Mr Power said price volatility was being driven by the rundown of high stock levels at Chinese ports, and Beijing’s recent crackdown on iron ore import loans.
“This is probably impacting a lot of small traders who have been using iron ore, steel, soyabeans and other commodities as collateral for loans,” he said.
But he said these were short term issues and dismissed bearish forecasts by some analysts on the health of the Chinese economy and the iron ore market, saying that long term demand for the raw material remained strong.
“There have probably been more defaults in Europe in the past week than in the entire Chinese steel industry to date,” he said. “[China] is one of the fast growing economies in the world with one of the largest populations. It is a fantastic market to be in.”
Nevertheless, Fortescue is examining how it can diversify its customer base, which is almost exclusively Chinese.
In recent a credit report on Fortescue, Moody’s noted “a more geographically diversified customer base” would be supportive of a rating upgrade.
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