Metro holds 70% increase in shipping costs responsible for its declined profit margins

Australian exploration and mining company Metro Mining Limited said that its profit margin per wet metric tonne (wmt) decreased by 36 per cent in the fourth quarter ended on December 31, 2019. According to the company, increased shipping costs over the year by almost 70 per cent are responsible for its profit margin fall.

Metro said the shipping costs were higher due to a strengthening ocean freight market. It explained, “There was increased demand and vessels started transitioning towards the use of higher cost, low sulphur fuel as part of new regulations.”

The company’s quarterly performance report said the final shipment of the year experienced some issues relating to crane operation, which in turn led to a smaller monthly shipping average for December.

In the entire 2019, the company shipped 3.5 million wet metric tonnes of bauxite ore, with all December’s output shipped to China.

Metro Mining plans to expand its Bauxite Hills mine with the Phase 2 expansion, which will increase the mine’s output to 6 million wet metric tonnes a year. In November, the company secured a loan facility of US$32.5 million from the Northern Australia Infrastructure Facility, as finance for the development.

About 85 per cent of the total cost involved in the Phase 2 expansion would be spent on a floating terminal on the nearby Skardon River. Metro has already received tenders and the report says “the final board decision will follow completion of the detailed engineering and design work.”