Fortescue Metals Group has foreshadowed a shake-out among iron ore producers as new global supply will sharply cut the price of the commodity from its near-record highs.
New chief executive Neville Power said he agreed with the consensus among analysts that the iron ore price should fall when planned new global supply came on stream around 2014/15.
Fortescue, Australia’s third largest iron ore miner, could endure a price as low as $US70 a tonne, he said on Monday.
Mr Power said Fortescue would remain profitable if the iron ore price slumped by $US100 a tonne, from near historical highs at about $US176 per tonne currently.
“We are making sure our business is capable of surviving in those sorts of environments.
“There are lots of people who won’t survive a $US70 a tonne ore price.”
Mr Power, who recently took up the management reins at Fortescue from its founder Andrew Forrest, said the company was better placed to develop a new iron ore export port in Western Australia by going it alone rather than with rival Aquila Resources.
Aquila, Fortescue and China Metallurgical Group were expected to work jointly on the development at Anketell Point, which would be used by all three.
Fortescue is instead working on a plan of its own after falling out with Aquila over the ultimate capacity at Anketell Point.
The proposed port would be an alternative to Port Hedland, where Fortescue’s facilities were expected to reach full capacity in the next few years.
Mr Power said he would be happy to work with Aquila but to date talks had not gone far.
Fortescue is considering a staged development, capable of shipping as much as 350 million tonnes per annum (Mtpa) when completed, opening up a new export route for the minerals-rich Pilbara region of WA.
Given Fortescue had already built its own port facilities at Port Hedland, which it was now expanding, it had the expertise needed for Anketell Point, Mr Power said.
“We’ve got the critical mass.”
He said Aquila’s plan was for a smaller-scale port with capacity of 80 Mtpa.
“The problem is, by building an 80 million tonne port, you make it very expensive and very difficult to expand it beyond that,” Mr Power said.
“They are sort of saying ‘we’re just going to build the port to suit our needs and everybody else can sort out how they get access to it’.
“That’s what we’re opposed to – that’s why we’ve started to do the work ourselves.
“Aquila need to either amend their thinking and build a port that can be expanded up to 350Mpta or step aside and let someone else do it.”
Fortescue needs the new port once the company’s production reaches 155 Mtpa, from it current 55Mtpa.
At that stage, its facilities at Port Hedland will have reached capacity.
Mr Power said Fortescue had enough iron ore resource tonnages to justify the new port even without third-party users.
