Fortescue and Vale sign China focused MoU

Fortescue has signed a non-binding MoU with fellow iron ore major Vale S.A. to create a JV and blend their own together.

According to Fortescue, the MoU “sets out the principles on which Vale and Fortescue have agreed to pursue long term opportunities to create additional value for customers in the Chinese steel industry and enhance the competitiveness of their operations.”

It comes as iron ore experiences a recovery in the market, with ore with 62 per cent grades jumped nearly a fifth to US$63.47 per tonne, marking a 46 per cent since the start of 2016 and a more welcoming market for iron ore.

At the Port of Tianjin the overnight movement turned into the single largest one day gain ever.

“The iron ore and steel markets have gone berserk — they’ve departed from fundamentals and are heavily driven by sentiment,” Zhao Chaoyue, an analyst at China Merchants Futures Co in Shenzhen, told Bloomberg.

Regarding the new agreement between Vale and FMG, it puts forward the creation of one or more joint ventures for blending iron ore from both companies together.

“This new blended product will be developed to suit the long term needs of our customer and improve the efficiency of the supply chain to the steel industry,” FMG said in a company statement.

“The agreement also provides a framework for potential investment by Vale in Fortescue through a minority acquisition of shares on market and/or investment in current of future mining assets.”

Speaking on the agreement, Fortescue CEO Nev Power said “the MoU will allow us to work together to deliver long term value to our customers, through the efficient supply of an attractive and competitive new iron ore blend in China”.

 

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