Fortescue Metals Group Limited (ASX: FMG) is 0.7% lower on Friday morning after reporting to the market that it had achieved an annualised run rate of 160 million tonnes for June 2014. The actual tonnage of iron ore shipped for the 12 months to June 2014 was 124.2 million.
The shipped volume was slightly below previous company guidance but importantly Fortescue achieved an average realised price of US$106 per dry metric tonne over the financial year, and its delivered cost was US$52 per wet metric tonne.
With the iron ore price trading just under US$97 per tonne, it's all about volume, quality and cost minimisation for iron ore producers now.
The best placed are the majors – BHP Billiton Limited (ASX: BHP) continues to trade near its 52-week high at leastly partly thanks to its low cost and high quality status. In contrast the smaller players such as Atlas Iron Limited (ASX: AGO) and BC Iron Limited (ASX: BCI) are expected to struggle, as a result these stocks are trading near their 52-week lows.
Buying opportunity?
Some investors are suggesting that the sell-off has been overdone and now represents a buying opportunity. Certainly from a contrarian point of view that would appear a reasonable stance, however investors should approach each iron ore miner on a case-by-case basis rather than from an industry-wide perspective. If the iron ore price remains below US$100 and global supplies continue to increase then buyers will continue to favour higher quality product which will benefit high quality producers over those with inferior quality.
