Ore carriers at the Herb Elliott port in Port Hedland. Picture: Mogens Johansen/The West Australian.
Ore carriers at the Herb Elliott port in Port Hedland. Picture: Mogens Johansen/The West Australian.

UPDATE 2.55pm: Fortescue Metals Group has signed a $US275 million contract with a Chinese shipyard for four massive ore carrier vessels in a bid to boost efficiencies and cut costs.

FMG said the 260,000 dead weight tonnage vessels would be delivered between November 2016 and May 2017 with the majority of payments made upon delivery and funded from operating cashflows.

The company said the ships would account for about 6 per cent of its shipping fleet requirements.

It said the new vessels were much larger than the traditional capesize vessels that have dominated the seaborne iron ore market in recent years and would be designed to be ideally suited to Port Hedland's tidal conditions.

FMG chief executive Nev Power said the contract represented a strategic decision to secure long-term, low-cost freight on vessels that would complement infrastructure at Herb Elliott Port and maximise shipped volume.

"We are already in the shipping business, with an annual forecast spend of around $US1.5 billion a year," he said.

"These vessels are a natural extension of our supply chain and will play a significant role in increasing efficiencies at the port and lowering costs.

"They also reflect and strengthen our close relationship with China, our largest customer."

FMG said the larger vessels offered operational efficiencies and higher carrying capacity but did not significantly deviate from the size parameters of vessels already operating in the Pilbara.

Mr Power said the contract was consistent with Fortescue's strategy of improving efficiencies and lowering its cost base.

"Owning and managing vessels especially designed to complement conditions at the Port and to maximise shipped volume is expected to reduce our costs below benchmark rates," he said.

FMG shares, which have been under heavy selling pressure in recent days owing to the falling iron ore price, closed steady at $4.06.

The West Australian

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