Fortescue Metals Signs Contract to Build Iron Ore Ships

Australia’s third-largest iron ore producer, Fortescue Metals Group, has signed a $275 million contract with a Chinese shipyard to build four specialist iron ore carriers.  The deal will allow the company to cut costs and improve efficiencies as prices for the precious metal linger at two-year lows.  

The four vessels, which will be much larger than the traditional Cape-size vessels, will be designed specifically for Port Hedland’s shallow harbor and tidal conditions. In addition to being larger, the ships will be capable of carrying 260,000 tons of iron ore, making them the biggest ships servicing the port.

According to Fortescue CEO Nev Power, the vessels will help maximize iron ore export volumes while also lowering freight costs.

"These vessels are a natural extension of our supply chain and will play a significant role in increasing efficiencies at the Port and lowering costs," Power said. "They also reflect and strengthen our close relationship with China, our largest customer."

The construction and delivery of the four ore carriers is expected to be delivered from November 2016 to May 2017.

Earlier this month Port Hedland announced more than one million tons of iron ore had been shipped in a single day, breaking the previous record by more than 160,000 tons.

Iron ore miners including Fortescue, BHP Billiton and Rio Tinto have been battling price slumps as iron ore prices have fallen to the lowest since 2012. The price has now fallen by almost 35 percent since December last year.