Fortescue Seen Leading New Ore Supply as Chichester Expands

Fortescue Metals Group Ltd. (FMG), Australia’s third-largest iron-ore exporter, will drive about 50 percent of the growth in shipments of the steel-making commodity next year as a project expands, Macquarie Group Ltd. said.

The Perth-based mining company started to export additional iron ore last week, suggesting its Chichester Hub expansion is operational, the investment bank said in an e-mailed report today, citing preliminary shipments data. Chichester is in the Pilbara region in the north of western Australia, where most of the country’s iron ore is produced.

“This is set to provide the first decent sequential lift in Australian exports this year,” the note said. “We expect Fortescue to provide roughly half the 55 million metric tons per annum seaborne iron ore growth seen in 2013.”

Fortescue shipments from Australia, the world’s largest exporting nation, are central to 2013 global supply estimates, according to Macquarie. The mining company said in October that its Chichester projects would be producing 95 million tons a year by the current month.

Ore with 62 percent iron content at the Chinese port of Tianjin gained 17 percent to $135.40 a dry metric ton this month, data from The Steel Index show.

Separately, a 30 percent slump in freight costs to about $7 a ton since mid-November is boosting iron ore prices for Australian miners, Macquarie said. The implied free on board price -- or the cost of the product once freight is stripped out -- is the highest since July, according to Macquarie.

Shipping costs fell today, according to data from the Baltic Exchange in London. The Baltic Dry Index, an overall measure of commodity shipping costs, slid 1 point to 699.

Two of the four vessel types that comprise the gauge declined. Panamaxes, the largest to navigate the Panama Canal, fell 1.5 percent to $5,536 while Supramaxes fell 0.6 percent to $7,607. Capesizes, the largest iron-ore carriers tracked by the exchange, gained 1.7 percent to $4,895. Handysizes, the smallest, advanced 0.2 percent to $6,602.

To contact the reporter on this story: Michelle Wiese Bockmann in London at mwiesebockma@bloomberg.net

To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net

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