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Fortescue Metals suspends long term shipping contracts
By Marcus Hand in Singapore - Friday 5 December 2008
Fortescue said it had “exercised suspension of all of its long term CFR shipping Contracts of Affreightment and Consecutive Voyage Contracts on the basis of unforeseen circumstances.”
It said that the had been increased demand for FOB shipping from customers and that its shipping volumes would not be affected.
“The changed arrangements as a result of these suspensions, should not affect Fortescue’s marketing program in regards to volumes of product shipped, just the split between CFR and FOB sales terms,” the company said.
“To date approximately two-thirds of Fortescue’s sales have been on CFR terms but this is likely to reduce to around one-third of sales. The changed arrangements are in direct response to market conditions demanding greater FOB sales.”
The Australian iron miner made its first shipment from its $2.6bn iron ore project in Port Hedland in May this year. Fortescue targets shipping 15m to 16m tonnes this year, having cut back its estimates following a shutdown of both the wharf and processing plant last month to expand capabilities to ship a planned 55m tonnes in 2009.
The company has made 70 shipments of iron ore to China so far.
Fortescue signed an agreement late last year to charter two capesize vessels for five and 10 years with Compagnie Maritime Belge subisidary Bocimar.
Bocimar said vessels were contracted to move 30m tonnes of iron ore, with the first to be delivered late this year or early in 2009.
Long term contracts would have been fixed when the dry bulk shipping rates were at some of their highest level, whereas today capesize and panamax spot rates languish at the lowest average levels ever recorded by the Baltic Exchange.
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