The twelve month swap was unchanged yesterday at $116.69. Spot was up marginally to $136.10. Rebar average was down one pip to 3552. Futures fell a bit more. Chinese port stocks rose again last week to just 80 million tonnes, the highest level since the great restock.
The news is all about FMG and it’s loans repayments:
Iron ore miner Fortescue Metals Group, racing to pay down $9.3 billion in net debt as sales to China soar, expects to shake off its junk credit status by 2015 to seal a spot alongside sector behemoths Rio Tinto and BHP Billiton.
Just 15 months ago, as iron ore prices plunged, Fortescue was considering the part-sale of its prized rail and port assets to help pay off the mountain of debt it amassed to build the world’s fourth-largest iron ore mine in just five years.
But a price
rebound allowed chairman Andrew Forrest to announce on Wednesday the group would pay off $1 billion by Dec. 20 of $2.04 billion in notes that were due to mature in 2015, and expected to redeem the balance in coming months.
“Don’t be surprised if in the next several weeks, several months, we do another $1 billion,” Forrest told reporters after the company’s
Forrest has been Fortescue’s largest shareholder from its start a decade ago and last week acquired a further 2 million shares on market, taking his stake to 32.9 percent.
Fund manager BlackRock Group this month acquired just over 5 percent of the stock.
In another sign Fortescue has arrived, it is set to become a “peer” company used by BHP when when it calculates incentive payments for its top managers.
Fortescue has said it will focus on paying down its debt as quickly as possible now that it has passed the peak of its mine expansion program and is nearing its targetted production rate of 155 million tonnes a year.
“We’ll be at investment grade metrics I’d say within 18 months,” Forrest said.
Fortescue still has a junk corporate credit rating, even after Standard & Poor’s last week raised the miner to ‘BB’ from ‘BB-‘.
However its senior secured debt rating was revised up to ‘BBB-‘, putting it at investment grade, based on its rising output, competitive cost position and long reserve life.
“Its limited product diversity and high exposure to China’s steel industry and volatile commodity prices offset these strengths,” S&P said on Nov. 6.
It’s a remarkable story and really deserved the slice of luck handed it by India bureaucrats. Another test lies ahead next year as prices come under renewed strain in Q2 but the BlackRock stake says a lot.
