Fortescue Metals Group Ltd has signed additional 10 year sales agreements for an aggregate of 5 million tonnes per annum.The contracts with a further five steel mills brings total sales agreements signed by Fortescue to date to 30 Mt/a.This represents 67 per cent of Fortescue's initial planned production of 45 Mt/a and sees the company achieve its ambition of having two thirds of its planned production under contract. Prices under the contracts have been set with reference to industry standards, while the names of the counterparties are confidential.These latest sales agreements are a great way for Fortescue to round out the calendar year and ensure that its aggressive financing plan target has been reached in a timely manner. Driven by spectacular growth in China, world iron ore demand currently exceeds supply, forcing up prices and constraining the development of the Chinese steel industry. Fortescue has positioned itself to take advantage of this opportunity, both as an owner of significant iron ore resources and as a competent provider of necessary infrastructure.The marketing objective was to focus on Asian steel mills that were in the upper tier of iron ore consumers and that were believed to be long term sustainable operators with expansion potential upside. Organisations fitting the brief have expressed a desire for long term supply relationships that will underwrite their longer term steel production programs.While Fortescue continues to experience additional strong demand for its planned production base, it intends to hold committed sales to well below 100 per cent of proposed initial production allowing it some marketing flexibility as the project moves through the implementation phase.
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