Australia's Fortescue Metals Group (FMG.AX: Quote) cut its full-year sales forecast by 15 percent to 26 million tonnes on Wednesday, following heavy rains in the March quarter, the second iron ore miner to signal lower production this week.
Fortescue, the world's No. 4 iron ore miner, also said that at $26.21 a tonne, its cost of production was too high and it needed to focus on improving margins.
The adverse operating conditions over the March quarter will impact on the full year results as Fortescue will not be able to catch up lost production, the company said.
Fortescue shares fell nearly 4 percent to A$2.33, far outpacing a 0.3 percent decline in the wider market .
Fortescue, which sells all its ore to Chinese steel mills said it shipped 6.2 million tonnes in the March quarter, steady with the previous quarter but below its expectations.
The mining ramp up program was well under target with 6.55 million tonnes produced in the quarter, down 22 percent on the December quarter due to the combined impact of deliberate scale back of drill and blast generated ore and the adverse impact of heavy rains, the company said.
The world's biggest supplier, Vale (VALE5.SA: Quote) (RIO.N: Quote), said on Tuesday it will cut iron ore production capacity 25 percent by halting mining of low-grade ores and shutting down higher-cost operations.
In the absence of a new benchmark iron ore price to date, Fortescue since April 1 said its been selling its ore at interim prices, reflecting the spot market values, though these will be adjusted once an annual price is established.
Over the last quarter, spot prices for ore were running between $60-$70 a tonne for Fortescue-grade ore, the company noted.
BHP Billiton's (BHP.AX: Quote) (BLT.L: Quote) iron ore sales under cheaper spot prices have trebled to nearly 30 percent, while Fellow Australian miner Rio Tinto Ltd/Plc (RIO.AX> (RIO.L: Quote), reserved about 15 million tonnes of last year's total production of around 154 million tones for the spot market.
Mixed demand for ore by steel makers meant some customers were taking more ore and others less than previously ordered, according to the company, keeping stockpiles in Australia at a minimum, it said.
Chinese ports had in stock 70 million tonnes of imported iron ore, compared with normal warehouse inventories of 30 million tonnes, China Iron and Steel Association official told reporters on Tuesday. (Editing by Jonathan Standing)
© Thomson Reuters 2009. All rights reserved.