IRON ore miners face billions of dollars in additional fuel costs as diesel prices soar following the near-closure of the Strait of Hormuz, said Reuters citing a senior executive at Australian iron ore producer, Fortesque.
Benchmark Singapore diesel swaps were trading at slightly more than $180 a barrel on Monday, almost double the $92.5 a barrel recorded before the US-Israeli strikes on Iran began, said Reuters referencing LSEG data.
“A 10-cent change in the price of diesel impacts us by $70m,” said Dino Otranto, metals and operations CEO at Fortescue. “If you look at our competitors, the top four, every 10-cent movement has a half a billion US dollar impact on the cost structure.”
The world’s fourth-largest iron ore supplier sources most of its fuel from South-East Asia but was comfortable with current stocks, Otranto said, provided the conflict does not escalate further.
Fortescue’s push to electrify operations using renewable energy had positioned it well for the supply squeeze, he added. The company expects to save at least $100m in diesel costs over the next 12 months and plans to cut consumption by one billion litres of diesel equivalent over the coming years, said Reuters.
“We announced a very aggressive decarbonisation agenda some years ago,” Otranto said. “For a number of years, that plan has been met with a lot of criticism, but now the tides are shifting.”
Fortescue is also in talks with China’s state iron ore buyer China Mineral Resources Group, which Otranto described as dynamic and not confrontational.
