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Australia’s Fortescue eyes modest 2020 growth for Chinese steel output

By Emily Chow

SHANGHAI, Jan 15 (Reuters) – China’s steel production is expected to grow only modestly this year, driven by rising urbanization and Belt and Road Initiative projects, Australia’s Fortescue Metals Group chief executive Elizabeth Gaines said on Wednesday.

Gaines, who heads the world’s No. 4 iron ore producer, said she expected China to produce around a billion tonnes of steel in 2019, with Chinese data showing 7% growth for the first 11 months of the year.

“We’ve yet to see official numbers for (all of) 2019, I would expect more modest growth in 2020,” Gaines said.

“The ongoing trend of urbanization remains very steel intensive. We’re seeing more high speed rail investments, more airports being built, significant investment that does demand steel,” she told an event in Shanghai where the company has opened a new office.

China produced 904.18 million tonnes of steel in the first 11 months of 2019, according to official data. December figures are due later this month.

FMG, which produces around 170 million tonnes of iron ore a year, selling mainly to China, set up a Chinese trading entity in April last year in an effort to focus on smaller lot size transactions denominated in yuan.

“Moving forward we expect to see about 5% of FMG China sales being transacted by this channel,” Gaines said, adding that she expects strong demand for higher grade concentrate going forward.

FMG has been raising the mix of premium feed in its shipments following the addition of its medium grade 60.1% West Pilbara Fines product from its Eliwana project in late 2018.

Its upcoming Iron Bridge project, scheduled for first shipment in 2022, will deliver 67% high grade iron magnetite concentrate.

“We see in the longer term there will be strong demand for that very high grade magnetite concentrate,” Gaines said.

Higher quality ore produces more steel for each tonne that is processed, and can reduce emissions as less coke is used in production.

China’s appetite for high-grade iron ore, however, is expected to drop this winter, as steel mills cut costs and prop up profit margins due to a slowing economy, say industry sources. (Reporting by Emily Chow; editing by Richard Pullin)

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