A terminated shipping contract has cost Fortescue Metals Group US$ 3.7 million. The iron ore miner had cancelled a five year shipping contract with Armada in January 2009. The Singapore based Armada then brought arbitration proceedings against Fortescue seeking alleged damages worth US$70 million.
Fortescue had also offered Armada $4 million to compensate for the two shipments that Fortescue had suspended in December 2008 before cancelling the contract for shipping. This was based on the global financial crisis at that time which had created a slump in the iron ore demand worldwide.
Fortescue had made the offer even before the arbitration hearing and Armada had at that time rejected it. The Fortescue Metals Group is Australia's third largest iron ore exporter. Fortescue has posted a profit of $681.62 million for the fiscal year 2010.
With the finalisation of the dispute the settlement of the shipping contract cancellation is in order. The damages to be paid are far less than what Armada had originally claimed. The shares of Fortescue climbed 2.9 % after the facts were confirmed.