Fortescue, an Australian iron ore mining company Metals Group has warned that rising diesel fuel prices linked to the conflict in Iran could add billions of dollars to production costs, as well as lead to severe disruptions in fuel supply routes, according to a Reuters report.
Supply disruptions lead to a sharp spike in diesel fuel prices
Reuters reported that the US-Israeli war with Iran has largely halted shipments through the Strait of Hormuz, reducing global fuel supplies and raising diesel prices. Benchmark Singapore diesel swaps rose to just above $180/barrel from $92.5/barrel before the conflict, according to data from the London Stock Exchange (LSEG).
Cost impact on miners
According to Fortescue's CEO of metals and operations, Dino Otranto, every $0.10 increase in diesel prices results in a $70 million impact on the company's value. Otranto also pointed out that for the world's four largest iron ore producers, each increase of $0.10 leads to additional costs of about $500 million
Decarbonization cost pressures
Fortescue said it is currently- I am still satisfied with my fuel reserves, which mainly come from Southeast Asia. However, the company noted that this position depends on whether there will be a further escalation of the conflict, as prolonged disruptions may tighten supply conditions.
The company also emphasized that its decarbonization strategy helps reduce exposure to fuel price volatility.
