Chief executive Nev Power said the purchase of eight ore carriers, each capable of carrying 250,000 to 260,000 tonnes of ore, would improve loading efficiencies at its shipping hub of Port Hedland.
“The key benefit for us from having those larger ships is they’re designed specifically to maximise the output from our berths and from Port Hedland inner harbour,” Mr Power told reporters on Wednesday.
“We expect to see more and more 250,000 tonne ships coming into Port Hedland which will continue to push up the average ship size through the harbour, improve the efficiency and improve the capacity and throughput.”
Chinese steel makers are the biggest buyers of Fortescue’s iron ore and the eight ships are expected to account for 12 per cent of the company’s shipping portfolio.
Perth-based Fortescue said there was a relatively limited fleet of large vessels which were ideally suited to Port Hedland which has limited capacity.
“We are also encouraging other ship owners and other shipping companies to invest in these ships because they will form a core part of the trade between the Pilbara and Asia,” he said.
The company will pay cash for the ships on delivery and does not expect the purchases to affect its debt repayment strategy. Fortescue expects operating costs of the vessels to be below market rates for similar sized ships which are in high demand.
The ships are expected to be delivered between November 2016 and early 2018. Fortescue, BHP Billiton and Atlas Iron all ship their iron ore from Port Hedland, Australia’s largest bulk commodity port.
In 2012 BHP Billiton shelved its $US19 billion ($A18.2 billion) Port Hedland outer harbour expansion project. It comes as the company missed its full year target despite producing at a record 160 million tonne a year rate during the last month of the fiscal year. The total number of annual shipments for the year was 124.2 million tonnes, below its ambitious 127 million tonne target.
Mr Power blamed material handling issues and bringing forward conveyor belt maintenance for missing the target. He added that it was taking “longer than expected” for expensive Chinese domestic production to cease.
“There are more and more mines starting to shut down production or planning to shut down production and we expect that readjustment occur over the short term,” he said.
Fortescue said demand in China remained strong and it is now targeting production of 155 million to 160 million tonnes in the 2015 financial year.