Fortescue Ltd has reported a sharp fall in iron ore sales as its pricing standoff with China begins to show up in shipment volumes and realised prices.
The miner sold about 42.9 million tonnes during the September quarter, almost 4 million tonnes below production and around 13% less than the record 49.7 million tonnes sold in the same period last year.
The shortfall comes amid continuing negotiations with China Mineral Resources Group, which has emerged as a powerful central buyer for the country’s steel industry.
Chinese mills have reportedly been discouraged from purchasing some Fortescue products, including its lower-grade Super Special Fines, while negotiations over pricing continue.
Fortescue’s average realised price fell to around US$80 per dry metric tonne from US$84 in the previous quarter.
The company has previously played down suggestions that the dispute was producing a significant inventory build, but the latest quarterly figures provide clearer evidence that sales are being affected.
China remains overwhelmingly the largest destination for Australian iron ore and therefore critical to Fortescue’s earnings.
The dispute is being watched closely across the Australian mining sector after BHP also faced pressure from China’s increasingly coordinated purchasing system.
Fortescue shares came under pressure following the update as investors assessed whether the negotiations could affect further quarters.
The key question is now how quickly the two sides can reach an agreement before unsold tonnes begin placing greater pressure on cash flow and realised prices.
