Fortescue Metals Group Orders Over 1 Million Deadweight in New Ore Carriers

June 16 (Reuters) – Australia’s Fortescue Metals Group said on Monday it has signed a $275 million contract with a Chinese shipyard to build four big iron ore carriers in an effort to cut costs as prices of the commodity sink to 21-month lows.

The vessels, each at 260,000 deadweight tonnes, would account for about 6 percent of Fortescue’s shipping fleet requirements, it said.

They would be delivered between November 2016 and May 2017, the world’s fourth-biggest iron ore producer said.

The shipyard building the vessels was not named due to confidentiality clauses, according to a Fortescue spokeswoman.

“We are already in the shipping business, with an annual forecast spend of around $1.5 billion a year,” Chief Executive Nev Power said in a statement.

Aiming to maximise shipping tonnages, the vessels will “reduce our costs below benchmark rates,” according to Power.

Fortescue is raising production 57 percent this year.

Big iron ore miners are investing in their own vessels to curb transport costs and increase competitiveness as prices of the steelmaking raw material slide.

Brazil’s Vale expects to have 35 of its 400,000-dwt Valemax vessels this year, as it aims to improve its postion compared with Australian rivals which are closer to top market China.

Iron ore for delivery to China fell 0.7 percent to $90.90 a tonne <.IO62-CNI=SI> on Friday, the lowest since September 2012.

Prices are being dragged down by a rising global supply, which Goldman Sachs sees outpacing demand by 72 million tonnes in 2014 and 175 million tonnes in 2015, underscoring moves by miners to reduce costs (Reporting by Manolo Serapio Jr.; Additional reporting by James Regan in SYDNEY; Editing by Ed Davies)