Fortescue’s Power makes an obvious, but crucial point about Chinese growth
Fortescue Metals has managed in six short years since the construction of its first mine to become a 155 million tonne a year producer ranking it number four in the world.
The Perth-based miner was trading sharply higher on Thursday after reporting better-than-expected results showing record profits and falling costs at its Australian mines.
The health of China’s economy and the rate of its infrastructure investment is a big deal for all global mining companies, but few more so than Fortescue. The ASX-listed company is heavily reliant on China, a huge financial backer of the company and its number one customer.
In this Bloomberg interview about the results, CEO Neville Power makes an obvious observation about Chinese economic growth, but one that is often left out of the China commodity conversation.
Asked whether Fortescue is coming late to the Chinese-led supercycle, Power points out (around the 1:30-mark) that the 7.5% growth rate everyone in the resource sector is worrying about is actually a “very strong number”.
China’s economy has doubled in the past six years and in terms of the size of the economy today’s rate equates to the 14% – 15% back when Fortescue broke ground on its first mine, Power explains.
In short, Power is telling everybody talking about hard landings and kvetching about the lowest Chinese growth rate in decades to learn to stop worrying and love 7.5%.