China has set a target of 6 per cent to 6.5 per cent gross domestic product (GDP) growth this year, down from 6.6 per cent last year, but Ms Gaines said China was still the second fastest growing economy in the world and one year’s growth was the equivalent of the entire Australian economy.
She said last year set a record for steel production in China, and despite predictions that the Chinese government’s push to impose environmental restrictions on steel mills could permanently reduce demand for lower grade iron ore, such as Fortescue’s product, this hadn’t happened.
Instead, demand and prices for Fortescue’s iron ore had soared since January as Chinese steel mill customers found ways to reduce their emissions using new technology, and improving iron ore transport methods.
In February, Fortescue, like other large miners, reported healthy trading conditions posting a $900 million profit and announcing a $327 million dividend. BHP and Rio Tinto also announced bumper results as demand from China coupled with iron giant Vale’s withdrawal large amounts of supply due to another deadly dam collapse in Brazil.
In that environment the price of iron ore has surged from about $US64 ($A91) a tonne late last year to about $US84 a tonne on Friday. Over the same time period Fortescue’s share price has lifted from about $4.10 in December to Friday’s closing price of $6.50.
Ms Gaines said Australian iron ore shippers had seen “no impact” at Chinese ports, despite a headline grabbing slowdown in Australian coal.
Perhaps the import of Australian coal was exceeded and that slowed down a little.
Fortescue chief executive Elizabeth Gaines
Confusion over the cause of a slowdown in Australian coal being unloaded at northern Chinese ports since January, and false reports of a “ban” on Australian coal, showed the importance of Australian exporters maintaining a close dialogue with Chinese customers, she said.
She said “there’s been a slow down” in Australian coal not a ban.
“My understanding is there was a certain view on allocation targets for various countries, and perhaps the import of Australian coal was exceeded and that slowed down a little,” she said.
Unlike Australian iron ore, coal faces competition from dirtier but cheaper coal mines in China.
“There is a bigger domestic coal industry here in China… I think that in terms of coal imports there may be some desire there to support the local industry. But from an iron ore perspective we haven’t seen any impact at all,” she said.
Fortescue had a Chinese state owned steel mill as a major shareholder and kept close to its Chinese customers by having a permanent presence in China, she said.
“I would encourage any company that has a strong reliance on China… if you want to participate in that market you need to know that market and you need to take a long term view and really develop relationships,” she said.
With a federal election looming and polls suggesting a potential change in government, Ms Gaines said she believed both major parties understood the importance of the trade relationship with China.
“If I look at the West Australian government that came into power two years ago, a Labor government, the Premier of West Australia has made at least three trips here to China… I think there is a very good understanding on both sides of politics,” she said.
She said her “only wish” was that dialogue with China continued.
“There was a trade agreement signed…I just would like to see that continue, understanding the importance of the relationship and continuing to nurture and foster that relationship.”
Kirsty Needham is China Correspondent for The Sydney Morning Herald and The Age.