Iron ore miner Fortescue Metals expects the "unprecedented resolve" of the Chinese government to shut down parts of its domestic steel industry could provide a further fillip to its imports of iron ore in the year ahead.
In 2016, China imported a record 1.02 billion tonnes of iron ore, with the rise largely due to cuts to domestic production of the metal. Iron ore is a key input when making crude steel.
For 2017, the Chinese government is cracking down on electric arc furnace steel production which could remove as much as 40-60 million tonnes of steel produced from these plants which could in turn lift iron ore demand by 40-50 million tonnes.
"The market could take that in its stride," Fortescue chief executive Nev Power said.
Fortescue maintained at 165-170 million tonnes its forecast for 2016-2017 shipments after shipping 42.2 million tonnes of iron ore in the December quarter which was little changed from the 42.1 million tonnes volumes it recorded a year earlier.
HIgh prices helped the company repay a further $US1 billion of borrowings in December, which reduced gearing to 36 per cent.
Debt repayment will be the continued focus, Mr Power said, although it will review its dividend policy when reviewing results for the December half.
"I see us maintaining our payout ratio," he said. "We will review it at the upcoming board meeting. We're doing pretty well on debt repayment."
Strong demand for iron ore helped to lift the price of iron ore deliveries to $US64.87 a tonne, ahead of the $US40-60 a tonne band of the past few years, at a time when the group managed to continued to reduce costs.
"Long may it continue," Mr Power said of the uplift in the iron ore price, which has benefited from buoyant demand levels.
The price of Iron ore fell to a decade low of $US38 a tonne in late 2015, but rebounded 80 per cent in 2016 following improved steel demand in China.
RBC Capital Markets analyst Paul Hissey said while volumes were in line with Fortescue's target, the company's cost reductions had clearly beaten expectations of falling to between $US12-$US13 per wet metric tonne.
"Price realisation above the upper end of guidance was also pleasing and no doubt contributed to better cash flow which has facilitated further debt repayments," he said in a note.