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It is surely welcome that a company in a notoriously male-dominated industry has appointed a female chief executive. But for Fortescue Metals Group shareholders, Elizabeth Gaines’s views on China’s steel industry are more interesting than her gender.

On Thursday, the world’s fourth-largest iron ore miner said Ms Gaines would take over the top job from Nev Power in February. It also said it wants to tilt the majority of production towards ores with an iron content above 60 per cent. In the past the group has focused on producing lower grades of iron ore, a strategy that looks to be running out of road.

Fortescue’s shares have underperformed those of rival Rio Tinto by 43 per cent since April. True, Rio is a diversified group as well as a big ore miner. Even so, the market clearly does not agree entirely with Mr Power’s upbeat assessment of the iron ore market, delivered a year ago.

China’s shutdown of inefficient and polluting steel mills has led to record margins for the survivors. They prefer higher-grade ore for economic reasons; it allows them to produce more steel more quickly. Higher steel prices would normally attract competitors whose output drives prices back down. Steel mills then look to cut input costs, and relative demand for cheaper iron ore improves. But Beijing’s twin drive to cut overcapacity and pollution may have changed the rules permanently.

As the state continues its clampdown into a typically smoggy winter, Fortescue’s own performance indicators corroborate that. It expects to realise up to 75 per cent of the high-grade benchmark price for its 2018 sales, down from at least 85 per cent last year. Fortescue’s ore stocks in Chinese ports have increased to 39 days of output, more than three times the 2017 low, according to Deutsche Bank.

Ms Gaines will thank Mr Power for cutting leverage and production costs as the diversification project proceeds. But things might still get worse before they get better.

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