The Fortescue Metals Group Limited (ASX: FMG) share price is currently up 0.3% at the time of writing as investors and brokers have their say on the iron ore miner's quarterly production for the three months to 31 March 2021.
What happened to the Fortescue share price?
Yesterday, Fortescue gave its update which said that for the three months it shipped 42.3 million tonnes (mt), in line with record third quarter shipments last year. Year to date shipments of 132.9mt were 2% higher than the comparable period in FY20.
The iron ore price was a particular highlight. Average revenue of US$143 per dry metric tonne (dmt) increased 17% compared to the previous quarter with revenue realisation at 86% of the average Platts 62% CFR Index.
The C1 cost of US$14.90 per wet metric tonne (wmt) increased 16% compared to the second quarter due to seasonally lower volumes and the strength of the Australian dollar, with year to date C1 costs of US$13.45 per wmt.
The broker Morgan Stanley said that the revenue realisation and shipments were both lower than the broker was expecting.
Fortescue CEO Elizabeth Gaines noted a few different things with some of her comments:
The commissioning of the Eliwana mine has contributed to an increase in both ore mined and processed during the quarter, despite the impact of significant rainfall across our operations in the Pilbara.
Significantly, Fortescue announced during the quarter a target to achieve carbon neutrality by 2030, positioning us as a global leader in the battle against climate change. We have set out clear priorities for our pathway to decarbonisation, including the establishment of a green mining fleet through the development and assessment of hydrogen and battery electronic solutions.
How is Chinese steel production going?
Fortescue said that Chinese crude steel production was 1,065mt for the 2020 calendar year and 271mt in the first quarter of 2021, an increase of 15.6% compared to the prior corresponding period in 2020.
The miner said that underlying demand for iron ore remains strong and in conjunction with seasonally weaker supply, index prices strengthened during the March quarter. Despite, or because of, COVID-19 impacts.
Financial position
Fortescue finished the quarter with US$3.6 billion at 31 March 2021 after paying US$3.5 billion for the FY21 interim dividend and US$909 million of capital expenditure.
Fortescue Future Industries (FFI) continues to assess renewable energy and green hydrogen opportunities globally. It's going through a number of decarbonisation projects right now. One is developing a ship design powered by green ammonia and trialling that design in new ammonia engine technology, at scale. Another is testing large battery technology in Fortescue's haul trucks.
What to make of the Fortescue share price
Different brokers have different thoughts on the iron ore miner.
UBS has a price target on Fortescue of $18, with expectations of a lower iron ore price in the coming months and years.
Morgan Stanley thinks the miner is a sell with a price target of $16.10.
However, at the other end, Ord Minnett has a price target of $28. But, the broker notes that cost pressures are emerging. Even so, the amount of shipping for this quarter was below the analyst's estimate.
