Fortescue Warns of Output Guidance Cut If China Talks Aren't Concluded Soon — Update

By David Winning

SYDNEY--Fortescue, one of the world's biggest iron-ore miners, signaled it could cut annual production guidance if negotiations with China's centralized agency for purchases of the commodity aren't concluded by the end of December.

Fortescue attributed a gap between its iron ore sales for the three months through September and its shipments of the steelmaking commodity to ongoing talks with China Mineral Resources Group, which was founded by Beijing in 2022.

Fortescue confirmed it shipped 46.8 million metric tons of iron ore in its fiscal first quarter, but sold only 42.9 million tons over the same period.

Still, it held guidance steady for shipments, C1 unit costs and capital expenditure for the 12 months through June in an operational update to investors. That outlook hinges on a deal with CMRG.

"If negotiations with CMRG are not concluded by calendar year-end, operations may be affected, potentially including adjustments to production," Fortescue said on Thursday.

Fortescue currently expects to ship between 197 million and 207 million tons of iron ore in fiscal 2027, including up to 14 million tons from the Iron Bridge operation.

Shares in Fortescue--the world's fourth-largest iron-ore miner by output, ranking behind BHP Group, Rio Tinto and Brazil's Vale--fell more than 4% in Sydney trading to their lowest level since June 2025.

China produces more than half of the world's steel, mostly using iron ore. Steel, used to build railroad, skyscrapers and warships, is critical to China's development and its growing military strength.

However, China produces less than a fifth of the iron ore it needs, sourcing roughly 60% of its imports from Australia and 20% from Brazil, where Vale is the dominant producer. Beijing's long-term strategy involves increasing iron-ore supply at home and overseas, while also increasing the use of recycled scrap steel.

Chinese companies have also partnered with Rio Tinto to extract iron ore from the Simandou project in Guinea, previously seen as one of the world's biggest untapped iron-ore deposits. Rio Tinto last week said Simandou is now producing at an annualized rate of 10 million tons after making its maiden shipment in December, and is continuing to ramp up.

Wood Mackenzie, a U.K.-based consultancy, said CMRG is moving from a centralized purchasing role to become a potential force in the setting of iron ore prices globally. This pivot involves collating data on deals, steering liquidity, and shaping benchmark price references through a state-backed platform.

"By channeling transactions through its own platform, CMRG is gaining greater visibility into mill restocking, cargo rerouting and immediate order flows," said David Cachot, Wood Mackenzie's head of steel, iron ore and alloys markets.

This has implications for mining companies and international trading houses, he added.

In a note to clients, Macquarie highlighted that Fortescue's inventory is poised to rise by an additional 4 million to 5 million tons this month as it strives to place excess iron ore with other customers.

"We anticipate reaching an agreement with CMRG in this current quarter as our base case but acknowledge the risk if negotiations remain protracted," said Macquarie, which had an outperform call on Fortescue ahead of Thursday's quarterly operational update.

Write to David Winning at david.winning@wsj.com

(END) Dow Jones Newswires

October 22, 2026 00:58 ET (04:58 GMT)