By Ambar Warrick
Investing.com-- Australian iron ore miner Fortescue Metals Group Ltd (ASX:FMG) reported a drop in its annual profit on Monday as weak iron prices, driven by fears of slowing Chinese demand, offset record shipments through the year.
Fortescue’s underlying net profit after tax in the year to June 30 slumped 40% to $6.2 billion, with revenue down 22%. But the profit reading was in line with estimates.
The world’s fourth largest iron ore producer by output said average revenue earned per dry metric tonne of iron ore shipped fell 26% through the year, even as its ore shipments rose 4% to 189 million wet metric tonnes.
The iron ore miner forecast 2023 ore shipments between 187 million to 192 million tonnes, with capital expenditure of $2.7 billion to $3.1 billion.
Iron ore prices crashed by over a third of their value in the past 12 months, as dwindling industrial activity in China due to continued COVID-19 lockdowns severely dented demand for the metal. The trend is expected to continue through the remainder of the year, given Beijing’s hesitance to budge on its strict zero-COVID policy.
Data over the weekend showed that the country’s industrial profits fell through the first seven months of the year, amid increased disruptions from COVID-related measures.
Fortescue and China-dependent iron ore miners such as Rio Tinto (ASX:RIO) have warned that a slowdown in the country is bound to adversely impact metal prices. A potential meltdown in China’s debt-saddled property market is also another source of concern for iron ore miners.
But BHP Group Ltd (ASX:BHP), the world’s largest miner, recently logged record profits, and forecast that Chinese iron ore demand would recover in the second half of 2022.
China is rolling out a slew of stimulus measures to shore up economic growth, including increased infrastructure spending. The move could potentially increase metal demand in the country this year.