From The West Australian:
Fortescue Metals Group and Vale could start bulk trials of blended ore with Chinese steel mills within a month.
Fortescue chief executive Nev Power said yesterday he hoped the iron ore major’s joint venture would be selling product by the end of the year.
Mr Power told analysts the two companies were still negotiating the terms of their proposed joint venture to sell blended ore in China — announced a month ago with much fanfare — but initial small-scale trials had gone well.
“The test work we’ve done to date has been sinter testing, and that’s leading up to a bulk trial which we would hope to do in the next little while — probably in the next month or so,” he said.
“And we would expect to be having ore into the market in the second half of this calendar year.”
As I’ve said before, this deal should go ahead but it is less transformative than it appears.
If Vale and FMG can mix material more cheaply than the Pilbara majors and win market share (which seems unlikely to me given the cost of blending) then it’s no skin off China’s nose to let them try given it intensifies competition in the major’s cartel and will lower prices further given it will keep FMG’s higher cost ore in the market for longer.
If China is concerned about collusion between the partners it should consider that with the two miners effectively fighting it out at the marginal cost of production already, any tonnes removed from the market would have been cut anyway as prices fall.
If it is worried about the alliance growing further it could always block it later.
