Jan 22 (Reuters) - Australia's Fortescue posted a 2% rise in second-quarter iron ore shipments on Thursday, supported by the resilient performance of its Iron Bridge project alongside an uptick in
Fortescue Strengthens Ties with China to Secure Iron Ore Supply
Fortescue's Strategic Moves in China
By Melanie Burton and Rajasik Mukherjee
Strengthening Leadership and Supply Chains
MELBOURNE, Jan 22 (Reuters) - Australia's Fortescue is deepening its ties to China and buying more equipment from its top customer, part of the reason its iron ore is flowing uninterrupted to the country, CEO Dino Otranto said on Thursday.
Production and Cost Challenges
China Mineral Resources Group (CMRG), which buys iron ore on behalf of more than half of China's steel mills, has meanwhile restricted domestic steel mills from purchasing some shipments from rival BHP in the midst of 2026 contract talks.
Record First-Half Output
That strategy has stoked industry concerns over China's dominance in many commodity markets, where it leverages volume to argue for better terms.
Impact of Rising Costs on Shares
To help ensure its iron ore exports keep flowing, Fortescue has bolstered its senior leadership in China and purchases of battery electric storage, solar panels and wind turbines from Chinese companies, Otranto told a results call, including from electric vehicle maker BYD .
"The relationship with Chinese customers has to evolve to a much more comprehensive ... relationship, and I think we're seeing now the fruits of that, so our volume still flows when the market ebbs and flows," he said.
Otranto said that while ties with China were much broader than simple transactions of iron ore, it was still having "robust" conversations with CMRG over supply.
"Notwithstanding that, it's critically important for us as we enter into very, very robust, very strong conversations with CMRG. We believe in a free capital market system, which in many cases, having aggregated buying groups somewhat flies in the face of that."
RECORD FIRST-HALF OUTPUT
Fortescue reported record first-half production on Thursday on upbeat performance from its hematite operations, while also logging a rise in costs that sent its shares down nearly 4%.
First-half production from its Iron Bridge magnetite mine, however, suggested the project may not meet its annual target.
The world's fourth-largest iron ore miner shipped 50.5 million metric tons of the steelmaking commodity in the three months ended on December 31, compared with 49.4 million tons shipped a year earlier, just beating a Visible Alpha consensus estimate of 50.3 million tons.
Its C1 unit cost of hematite iron ore rose 5% from the previous quarter to $19.10 a wet metric ton during the quarter, reflecting higher diesel prices, exchange rate fluctuations and the normalisation of inventory impacts that had benefited the prior quarter.
Those higher costs hit stocks, said Ben Richards, portfolio manager at Seneca Financial Solutions.
Shares fell as much as 3.6% on Thursday to A$21.380.
Shipments of high-grade ore from Iron Bridge rose 44% from last year to 2.2 million tons during the quarter. For the half-year, Iron Bridge shipped 4.3 million tons, suggesting the project may struggle to meet its full-year forecast of 10 million to 12 million tons.
"Production and shipments continued to miss expectations through the ramp-up of operations, and continue to indicate struggles with the plant," said Jefferies in a note.
The Perth-headquartered firm kept its forecasts for fiscal 2026 shipments, unit costs and capital expenditures unchanged. It will report half-year results on February 25.
(Reporting by Melanie Burton in Melbourne and Rajasik Mukherjee in Bengaluru; Additional reporting by Nikita Maria Jino in Bengaluru; Editing by Alan Barona and Tom Hogue)
