|Bid||10.21 x 0|
|Ask||10.22 x 0|
|Day's Range||10.11 - 10.38|
|52 Week Range||5.94 - 12.87|
|Beta (5Y Monthly)||1.17|
|PE Ratio (TTM)||6.31|
|Earnings Date||Aug 26, 2019|
|Forward Dividend & Yield||1.00 (9.29%)|
|Ex-Dividend Date||Mar 02, 2020|
|1y Target Est||3.43|
Fortescue Metals Group Limited (ASX:FMG) is about to trade ex-dividend in the next 4 days. Ex-dividend means that...
While the prices of most major commodities are wilting in the face of the coronavirus spreading out of China, iron ore is rallying, proving that supply disruptions can overcome the bearish sentiment over the economic fallout of the epidemic. Spot iron ore has rallied 14% since hitting a low of $79.85 a tonne on Feb. 3, closing at $90.85 on Monday, according to commodity price reporting agency Argus. Chinese iron ore futures on the Dalian Commodity Exchange enjoyed their longest winning streak in four years, rising 16.6% from a closing low of 580 yuan ($82.50) a tonne on Feb. 10 to end at 676 yuan on Monday.
(Bloomberg Opinion) -- Australia’s richest man Andrew Forrest cherishes his reputation as one of the good guys. That makes his intimate involvement in one of the world’s most polluting industries a problem.The founder of the world’s fourth-biggest iron-ore miner Fortescue Metals Group Ltd. has done spectacularly well from riding the Chinese steel boom of the past two decades. Net income at Fortescue increased nearly fourfold to $2.45 billion in the first half of the year, the company said Wednesday, delivering A$828 million ($554 million) of interim dividends to Forrest and Minderoo Group Pty., which he controls. The financial bonanza has been blessedly free of the scrutiny that ESG-focused investors such as BlackRock Inc. and Norges Bank Investment Management have devoted to thermal coal in recent months.That's rather remarkable. For all the attention on thermal coal, producing a metric ton of steel in a blast furnace releases almost as much carbon as burning a ton of coal for energy. Globally, the steel industry accounts for about 2.8 billion metric tons of annual emissions, compared to 10.1 billion tons for thermal coal. The world’s major iron ore producers are responsible for some of the largest volumes of end-use emissions globally, equivalent to those of the very biggest independent oil companies.While Fortescue doesn’t disclose such Scope 3 emissions (unusual for a company that values its reputation for responsible business practices), a back-of-the-envelope calculation suggests it accounts for around 250 million tons of carbon pollution each year. That puts the company somewhere between Rosneft Oil Co. and Glencore Plc. The 35% stake held by Forrest and Minderoo equates to annual emissions similar to those from the entire country of Bangladesh.How have steelmakers and iron miners evaded the attention of climate-focused investors? A large part of the explanation may be the perception that there’s no alternative to carbon-intensive blast furnaces to provide the world’s steel needs, rendering measures to reduce this emissions burden futile. That’s increasingly not the case, though. Electric arc furnaces making recycled metal from scrap have swept through the U.S. steel industry in recent decades to push dirtier blast furnaces aside. The same technology can be adapted to make non-recycled steel, too, and using hydrogen to burn off the oxygen from iron ore can potentially almost entirely decarbonize the steelmaking process.Swedish steelmaker SSAB AB this month announced plans with miner LKAB AB and utility Vattenfall AB to develop just such a fossil-free steel plant. While the product would cost 20% to 30% more than traditional blast furnace steel, it would be competitive at a carbon price of 40 euros ($43) to 60 euros a metric ton, according to a 2018 study — not that much more than current prices of around 25 euros in Europe’s carbon market. That would look still more attractive if falling prices for renewable electricity and hydrogen, plus wider deployment of electric furnaces, further drove down costs.Forrest is in a unique situation to push miners, steelmakers and governments to accelerate this transition. Unlike the boards and management of BHP Group, Rio Tinto Group and Vale SA, he’s the founder and chairman of his company and has a dominant shareholding.Forrest has made similar stands in the past. When he found at least 12 suppliers employing forced labor — an obvious conflict with his campaign against modern slavery — he promised to drum them out of business if they didn’t change.To date, that same principled approach hasn’t extended to the role that Fortescue and its customers play in climate change. Despite donating A$70 million to aid recovery from the bushfires which have swept Australia in recent months, he’s vacillated between citing the role of global warming in the disaster, repeating bogus claims that arson played the “biggest part” in the fires, and making questionable arguments around reducing forest litter.Pressed repeatedly in an interview with CNN last month to clarify what more he could be doing, he denied, implausibly, that the mining industry had “lobbied hard” against climate policies and said that “the science has to be done” on how to mitigate the fires. In a subsequent article for the Sydney Morning Herald, Forrest said that climate change is real and is intensifying natural disasters.Fortescue is unusually well-placed to benefit from any shift in the steelmaking industry toward a lower-carbon route. The big loser from a move away from blast furnaces would be coking coal — but unlike BHP and Vale, Fortescue doesn’t produce any. Its iron ore is of lower quality than its larger competitors, so would have most to gain from being upgraded to the iron briquettes that would be consumed by electric primary steel mills. Forrest has invested A$20 million to develop hydrogen export capacity for Australia. Using that gas for upgrading ore would represent a much better use of the technology.The risk for iron ore miners like Fortescue is that they’re betting everything on the odds that blast furnaces continue to dominate global steel production. With demand approaching a plateau, a glut of Chinese scrap looming, and rising attention on industrial carbon emissions, that’s no longer such a sure thing. A decade ago, miners were similarly full of confidence that wind and solar power could never supplant the role of thermal coal in electricity generation. How did that prediction turn out? (Corrects the second paragraph of column first published Feb. 19 to show that Minderoo Group Pty. is the entity that receives dividends; clarifies Forrest’s position on climate change in the 12th paragraph.)To contact the author of this story: David Fickling at firstname.lastname@example.orgTo contact the editor responsible for this story: Rachel Rosenthal at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- The global shipping industry has run into very rough waters in 2020 as the virus crisis that’s engulfed China and roiled commodity markets added to headwinds from a seasonal slowdown and poor weather. One chief executive who oversees a fleet of 55 vessels says there’ll be a comeback.“This is certainly temporary,” said John Wobensmith of Genco Shipping & Trading Ltd. “We think that the second half will spring right back,” the industry veteran said in an interview from New York, citing the potential for stimulus in China aiding demand, coupled with a lower supply of ships.The health emergency has hurt prices of everything from iron ore to soybeans, and weighed on freight rates that were already under pressure. Genco’s dry-bulk vessels ferry iron ore, coal and grains, linking mines and farms with the markets that need the raw materials, including Asia’s top economy. The hit from the virus, which has slowed activity at some Chinese ports, has come on top of other challenges that have hurt rates, according to Wobensmith.“What dry-bulk shipping is experiencing is not so much logistical issues,” said Wobensmith, who’s worked in the industry for over two decades.“It’s more just that because of the coronavirus, and the seasonality, and the weather, it’s been a perfect storm and it’s pushed rates very low on the larger ships.”The Baltic Exchange Dry Index, a gauge of vessel demand, sank 55% in January and hit the lowest since 2016 earlier this month as the virus spread through China, prompting the government to impose curbs on travel and industrial activity. Genco’s shares have taken a beating too, down 23% year-to-date.A particular area of weakness in the dry-bulk market has come from iron ore, the largest cargo by volume. Heavy rains in Brazil at this time of year typically curb flows. In addition, a cyclone that pummeled Western Australia this month spurred interruptions at some key ports.Slower Activity“We have continued to call China,” Wobensmith said, adding that Genco hasn’t had any ships diverted, and there are no known cases of force majeure declarations in the dry-bulk sector. “There’s slower port activity, you have less workers, but I think they’re planning for thatokay.”China has sowed expectations that it’ll ramp up spending this year to offset the impact of the virus, although top miner BHP Group has cautioned that the next six weeks will be critical. China’s construction and manufacturing sectors need to return to regular operations in April to ensure that existing disruption can be made up for before the end of year, the world’s biggest miner said.Australia miner Fortescue Metals Group Ltd. this week also highlighted the scope for stimulus. China’s desire to hit 2020 growth targets should boost iron ore because it’ll require investment in steel-intensive infrastructure, Chief Executive Officer Elizabeth Gaines told Bloomberg Television.Genco sees potential for stimulus in the second half, which would fuel demand for steel-making raw materials. At the same time, with more ships being scrapped and no orders for new vessels amid the negative sentiment, that would mean lower supply of vessels when demand picks up, according to Wobensmith. “The industry will be in a stronger situation,” he said.(Updates to add Fortescue comments in penultimate paragraph)To contact the reporter on this story: Krystal Chia in Singapore at firstname.lastname@example.orgTo contact the editors responsible for this story: Phoebe Sedgman at email@example.com, Jake Lloyd-SmithFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Today we'll look at Fortescue Metals Group Limited (ASX:FMG) and reflect on its potential as an investment. To be...
(Bloomberg) -- China’s steelmakers face their biggest crisis in years, with demand frozen as factories and construction sites fall silent. But they’re still churning out metal.The collapse in economic activity amid China’s unprecedented measures to contain the coronavirus outbreak means there are few buyers of steel, which has sent prices tumbling and put margins under intense pressure. However it’s difficult for most steelmakers in China to cut output drastically because blast furnaces are designed to run constantly, and reducing production to zero is usually a last resort. The result is millions of tons of steel piling up at mills.“Inventories are at critically high levels,” said Kevin Bai, an analyst at CRU Group. “Most mills are still trying to keep running for now though for technical reasons.”In China, a small number of steelmakers use electric arc furnaces, or EAFs, that remelt piles of scrap from old cars or torn-down buildings and turn it into fresh steel products. Those can be shut down quickly. The rest of the industry employs blast furnaces, huge and temperamental machines fed round-the-clock with iron ore, coking coal and other ingredients. Shutting those completely is an expensive and complex last resort.“As far as we know, they’re all still making steel,” Elizabeth Gaines, chief executive of Fortescue Metals Group Ltd. said on a call with reporters on Wednesday, referring to the blast-furnace producers that buy her company’s iron ore. EAF mills have largely stopped production already, according to consultancies CRU Group and Kallanish Commodities Ltd.China is the world’s largest steelmaker and accounts for more than half of global output. The virus crisis has crippled the industry’s supply chains, with the migrant workers that typically staff construction sites or drive trucks unable to return to work due to quarantine measures and movement restrictions. Spot prices for steel rebar have tumbled to the lowest since 2017, while inventories surged to the highest in almost two years as mills struggle to dispatch finished products amid transport problems. Rebar futures were last at 3,460 yuan a ton in Shanghai, down about 3% this year.Smelting rates in an ultra-hot furnace can be adjusted downwards but only to certain levels. The next and more complicated option is temporary hot-idling, which means keeping the furnace stoked and pausing steelmaking. An outright shutdown -- letting it go cold -- normally only happens for a complete overhaul after many years of operation, or for permanent closure.The challenge for blast-furnace managers is how quickly the economy, which was likely running at just 40% to 50% capacity last week, can return to normal. Utilization rates for blast furnaces in Tangshan have fallen to about 74% from a peak of almost 81% last year, according to data from Beijing Custeel E-Commerce Co.The last major round of market-driven closures was in late 2015 and 2016 when a demand slowdown in China triggered a global crisis of oversupply. The current situation has already seen an increase in steel offered for export, according to CRU Group.Many market watchers expect China to roll out stimulus to help bolster economic growth, buoying commodity demand. Fortescue highlighted past measures have included investment in steel-intensive projects. BHP has said if the virus impacts are contained by the end of March, consumers of materials such as steel and copper should fully recover from the second quarter -- and potentially operate at higher than usual rates -- meaning that overall demand in 2020 will be unaffected.“Obviously actual physical demand is pretty bad right now and we expect it to be bad in the short term,” Tomas Gutierrez, analyst at Kallanish Commodities, said by phone. But a lot of that demand may be delayed rather than destroyed, and there is this expectation that the government will take steps that will aid the economy’s recovery, he said.(Updates rebar futures prices in sixth paragraph)To contact Bloomberg News staff for this story: Krystal Chia in Singapore at firstname.lastname@example.org;Martin Ritchie in Shanghai at email@example.com;Annie Lee in Hong Kong at firstname.lastname@example.orgTo contact the editors responsible for this story: Phoebe Sedgman at email@example.com, Jake Lloyd-SmithFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Raw materials producers who rely on China for the bulk of their sales are showing confidence the risks posed by the coronavirus outbreak may soon ease -- and are poised to benefit from a forecast demand rebound.Iron ore shipper Fortescue Metals Group Ltd. on Wednesday added to guarded optimism expressed by BHP Group as well as a developing positive outlook from banks, including UBS Group AG, over the prospects for a sharp recovery in China’s growth from next quarter, a scenario that’ll spur commodities imports.The desire of China’s government to hit 2020 growth targets should boost iron ore because it’ll require investment in steel-intensive infrastructure projects such as railroads, Fortescue Chief Executive Officer Elizabeth Gaines told Bloomberg Television in an interview.“Those big stimulus measures that are focused on infrastructure are actually a positive for steel, and therefore for iron ore,” Gaines said Wednesday. Fortescue won about 95% of first-half revenue from China.BHP expects metals and bulk commodities could make up for volumes lost during the coronavirus disruption in the balance of 2020, so long as there’s a brisk recovery in China’s construction and manufacturing sectors next quarter. “We remain reasonably confident about the outlook,” CEO Mike Henry said in a Tuesday interview.Growth in the top consuming nation could rebound sharply in the next two quarters as “delayed consumption and additional China stimulus” flows through to the economy, UBS analysts, including Glyn Lawcock, said in a Wednesday note. That return to work is expected to favor base metals suppliers including Glencore Plc, Freeport McMoRan Inc. and OZ Minerals Ltd., the bank said.Any fiscal stimulus by China will also offer a boost later this year to base metals, which have strong upside as many of the materials are currently priced close to marginal cost levels, Perth-based South32 Ltd. said last week. The supplier of commodities, including manganese to nickel, wins about 22% of revenue from China.In the short-term, key commodities such as iron ore are avoiding any dramatic impact from China’s virus response, with the strength of demand reflected in the country’s port-side iron ore stockpiles, which remain below a 2018 peak, Fortescue’s Gaines said in the interview.“We are seeing continued demand, continued strength in the underlying iron ore price,” she told reporters earlier on a Wednesday conference call. “We are shipping and unloading as we speak in China, so it’s certainly business as usual for us.”The virus is also having a positive near-term impact on other commodity prices, including manganese ore and alumina, amid a slowdown at China’s domestic mines, South32’s CEO Graham Kerr said last week.Glencore sees a mixed picture for now, with some products being lifted as others falter, CEO Ivan Glasenberg told analysts on a Tuesday conference call. “In some commodities we have not seen an impact, orders are continuing, other commodities are slowing down,” he said.\--With assistance from Yousef Gamal El-Din.To contact the reporters on this story: David Stringer in Melbourne at firstname.lastname@example.org;Krystal Chia in Singapore at email@example.comTo contact the editors responsible for this story: Alexander Kwiatkowski at firstname.lastname@example.org, Keith Gosman, Alpana SarmaFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
The lush, green hills where Paulo Pires has for years brought sheep to graze above his picturesque Portuguese village may soon be transformed by the race to power electric vehicles. Hundreds of drill holes across the countryside show where miners want to excavate the land for lithium, a vital ingredient for batteries used in electric cars, smartphones and energy storage. "If my livelihood is taken away from me, I won't have a future elsewhere," said 45-year-old Pires, whose village lies in the municipal district of Boticas.
Fortescue Metals Group Limited (ACN 002 594 872) ("Fortescue") (ASX: FMG) today announced the expiration and results of the previously announced consent solicitation (the "Consent Solicitation") by its wholly-owned subsidiary, FMG Resources (August 2006) Pty Ltd (ACN 118 887 835) (the "Issuer") and receipt of the consents necessary to effect amendments to the indenture, dated as of May 12, 2017 (as supplemented to the date hereof, the "Indenture"), governing the series of notes described in this release (the "Notes").
(Bloomberg) -- Vessels and trains coming from China are in focus as nations take steps to halt the spread of a deadly coronavirus that originated in the world’s second-biggest economy. Here’s a roundup of some of the latest efforts by authorities globally, including quarantines and checks.Bloomberg is tracking the outbreak on the terminal and online.ArgentinaAuthorities are requiring advance copy of medical reports for all vessels arriving directly from China or any vessels that called in the Asian nation, according to NABSA shipping agency. The reports must include data on body temperature of each crew member.AustraliaEnhanced screening measures will apply to vessels that left China from Feb. 1, with the first ship to meet that criteria expected as soon as Feb. 10. The government is continuing to consult with port authorities and industry groups on the development and implementation of those measures. Foreign nationals who were in mainland China on or after Feb. 1 won’t be allowed to enter Australia until 14 days after they left or transited China, although limited exemptions exist for maritime crew, according to Australian Border Force.The restrictions mean that the 14-day period starts when the ship departs China and will be restarted for a further 14 days if any illness is reported, private shipping and logistics agency Gulf Agency Co. said Wednesday.Queensland state’s maritime safety body has already intensified checks on incoming foreign vessels, which are required to report if any crew member or passenger has visited mainland China since Feb. 1 or Hubei province in the past 14 days. They must also disclose if anyone shows coronavirus symptoms.Miner Fortescue Metals Group said vessels loading at its facilities in Port Hedland are scheduled to berth at least 14 days after departing mainland China, adding that iron ore is being delivered as planned.BrazilMaritime agents must notify port authorities in Paranagua and Antonina, of ships arriving from regions dealing with epidemics, which are not allowed to arrive less than 21 days since leaving the previous port, according to a statement from the ports.IndiaAt least 12 major ports are screening ships and crew members arriving from China, Hong Kong and Singapore. At least 31 vessels and 1,045 crew have been examined since Jan. 27.IndonesiaVessels that have visited China during their last 10 port stops will be thoroughly inspected by the Port Health Authority, according to Indonesia’s Directorate General of Sea Transportation. Anyone suspected of being infected with the virus must be treated by authorities. Animal inspections will also be carried out.While Indonesia scrapped a plan to ban Chinese food imports to prevent the spread of the coronavirus after Beijing warned of the “negative impact” of such measures on investment and the economy, it will no longer accept live animals from the Asian county.JapanAny non-Japanese crew who visited China’s Hubei province within the last two weeks, or people with passports issued from the Chinese province, aren’t allowed to enter Japan.PhilippinesThe Philippine Ports Authority said workers in ships coming from China are prohibited from disembarking to prevent the spread of the virus.SingaporeVessels that have traveled to China in the past 14 days must submit a health declaration form and other documents 24 hours before berthing, according to a Feb. 1 notice from the Maritime and Port Authority.South KoreaAny vessel that visited China within the last 14 days will be inspected by officials from the Korea Centers for Disease Control and Prevention agency before they enter ports to check the crew, according to an official at the Ministry of Oceans and Fisheries. The vessels can only enter South Korean ports if the inspectors find no sign of infection and give them the all-clear.ThailandThailand has set up a checkpoint in the Samut Prakan province where 20 to 30 officials from the Port Authority of Thailand and the Disease Control Department will screen all crews on vessels coming from China before they can moor at the Bangkok port. If any ship is found to have sick crew, it will be quarantined. The measures are also being applied for the country’s northern ports.(Updates with Australia precautions.)\--With assistance from Thomas Kutty Abraham, Aya Takada, Kyunghee Park, James Thornhill, Dan Murtaugh, Harry Suhartono, Suttinee Yuvejwattana, Nguyen Dieu Tu Uyen, Rajesh Kumar Singh, Krystal Chia and Isis Almeida.To contact the reporter on this story: Aaron Clark in Tokyo at email@example.comTo contact the editors responsible for this story: Ramsey Al-Rikabi at firstname.lastname@example.org, Jasmine Ng, Rob VerdonckFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Mining companies under investor pressure to curb carbon emissions are weaning themselves off the most polluting power sources, and see lower costs in using alternatives.Fortescue Metals Group Ltd. joined rivals including BHP Group and Anglo American Plc in flagging potential savings from new investments to switch mines to renewable energy as it expands a $700 million program to add transmission lines, solar arrays and battery storage in Australia’s Pilbara region. With energy accounting for as much as a fifth of a mine’s costs, less polluting options can often be cheaper than shipping diesel to remote locations.“We are very keen to utilize more renewables,” Chief Executive Officer Elizabeth Gaines said in an interview. “We know it’s the right thing to do. We want to reduce our emissions, and we want to stay low cost.”The Perth-based iron ore producer will install a hybrid solar and gas supply to serve its Iron Bridge project rather than using diesel, adding to a deal signed last year to switch its Chichester Hub to renewable sources.BHP, the world’s top miner, estimates deals announced last year to switch two giant copper mines in Chile to solar, wind and hydro sources in place of existing coal and gas power will lower energy costs by about 20%. Anglo, which has installed a bank of solar panels floating on a copper mine’s waste pond, said in September renewable energy will help deliver cheaper mining operations.A Mini-Solar Farm Is Floating in a Dam of Liquid Copper WasteMiners can save as much as 25% of total electricity costs, and cut their electricity-related emissions in half by using solar, wind or batteries to power their sites, BloombergNEF analyst Sharon Mustri wrote in a December report.Fortescue’s Chichester program will reduce diesel consumption by 100 million liters, about 20% of the company’s current total, and when completed, the new energy investments will see solar account for as much as 30% of the supplier’s power consumption at mines and plants.Australia’s diesel imports have declined, falling about 16% in December compared with the same month a year earlier amid reduced demand, including from miners, according to data from Vortexa. About 7% less fuel was shipped to the country in 2019 compared with 2018.“There is a significant movement underway at remote mining operations to use more solar power and renewables,” said Gavin Wendt, senior resource analyst at Mine Life Pty in Sydney. “A lot of remote mine sites have used diesel and that’s become increasingly expensive.”Along with cutting use of diesel at processing plants or pits, miners and their equipment suppliers are examining opportunities to lower or eliminate consumption of the fuel in haul trucks and trains, Fortescue’s Gaines said in the Thursday interview.Suppliers are introducing battery or gas-power alternatives, while Fortescue is studying the potential to use hydrogen as a replacement fuel.“We’re kind of impatient to get to the position where we can further reduce our reliance on diesel throughout our entire fleet, but the technology is still evolving,” Gaines said. “I don’t think we’re alone in wanting to see that reliance on diesel reduce significantly.”To contact the reporters on this story: David Stringer in Melbourne at email@example.com;Ann Koh in Singapore at firstname.lastname@example.orgTo contact the editors responsible for this story: Alexander Kwiatkowski at email@example.com, Rob Verdonck, Aaron ClarkFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- A rampaging epidemic in the country that consumes about half of the world’s metals has to be bad news for mining stocks, right?Investors are certainly making that bet. The week started with the Bloomberg World Mining Index falling the most in nearly six months, and a six-day losing streak continued Tuesday on expectations that a slowdown in economic activity will cut China’s voracious appetite for commodities.Australian shares of Rio Tinto Group fell as much as 5.9% when trading resumed after a public holiday Monday, on track for their biggest slide in three-and-a-half years. Those of iron-ore producer Fortescue Metals Group Ltd. slumped as much as 8.7% in early trading.That looks overdone. In the grip of an epidemic, it can feel like the sky is falling — but most such viruses die down in a matter of months, and people shouldn’t underestimate how much industrial stimulus Beijing will inject in the economy to keep growth on-target in the aftermath.Consider Severe Acute Respiratory Syndrome, which swept through southern China and east Asia in the early months of 2003. Like most coronaviruses — and indeed, most infections of the nose and throat, such as influenza — it exhibited a pronounced winter seasonality, with infections beginning in November and dropping rapidly through April, before approaching zero in June.Even Middle East Respiratory Syndrome, a coronavirus associated with parts of the world where winter weather is less extreme, showed a relatively similar pattern, with a peak in the early months of the year.Combined with this natural decline is the fact that, despite early surveillance and response lapses, China and other countries are already employing extreme measures to halt the spread. While quarantining of the entire city of Wuhan may not be sufficient — given the disease appears to have spread unchecked until it was too late — that probably won't be the last attempt to isolate the virus. China’s government, property developers and businesses are likely to implement further measures such as canceling public events and closing commercial and retail spaces.If things play out this way, it’s not impossible that the epidemic could start to subside in April, just as China’s industrial machine is revving up from its normal winter slumber. Cold weather and the long shadow of the Lunar New Year holiday typically lead to very low levels of industrial activity in January and February, before picking up to full speed between March and June.In the five years through 2018, for instance, daily pig iron production in March was about 7.4% higher on average than it was in January. Cement output ramps up even more rapidly, as warming weather makes it possible to mix concrete on building sites again: While January and February figures are often too weak to be reported by China’s statistical agency, May output over the same period averaged about 23% above the levels just two months earlier. That cycle could be particularly pronounced this year. China’s consumers are staying home during what’s traditionally been high season for shopping, dining, seeing films or traveling. A 10% fall in services consumption could cut gross domestic product growth by about 1.2 percentage points, according to S&P Global Ratings.That could, in theory, put a serious dent in output over the full year, which economists already expect to fall below the government’s target of “about 6%.” It might also violate a long-term pledge to double the country’s GDP by 2020, delivered on the eve of Xi Jinping’s accession to the Communist Party's highest leadership in 2012.Beijing is unlikely to take that sort of blow lying down. Just recall the responses to the 2003 SARS outbreak, the 2008 financial crisis, and the overzealous economic rebalancing toward consumption in 2015. As on those occasions, fixed-asset investment (particularly by state-owned companies) is likely to surge to fuel fresh industrial activity. China’s yearlong credit diet — no less serious, in its way, than the one that preceded the 2016 boom — will be loosened to inject some fresh life into a virus-hit economy.That’s likely to further defer China’s shift to an economy more dependent on consumption and less on mounting debt and carbon emissions — but it will also be bullish, not bearish, for commodities. China’s coal imports in the 12 months through June 2017 were nearly a third higher than in the preceding year; copper rose 12%, oil by 13% and iron ore by 7.7%.As the virus dies down, don’t be surprised to see that pattern play out one more time. What exactly is it about a country vowing to build two hospitals in a fortnight that makes investors think industrial commodities are heading for the sick bay?To contact the author of this story: David Fickling at firstname.lastname@example.orgTo contact the editor responsible for this story: Rachel Rosenthal at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
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Fortescue Metals Group lost out in its bid to develop two blocks at the Simandou iron ore deposit in Guinea, the Australian miner said on Thursday. A China-backed consortium of French, Singaporean and Guinean interests won the tender through its $14 billion bid, sources told Reuters on Wednesday. Fortescue said the Guinean government told them it would go ahead with "detailed negotiations" with the preferred bidder in the coming months.
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