Australian's third-largest iron
ore miner Fortescue Metals Group has offered deeper discounts to its major
contractual customers for April-loading cargoes of its main products compared
with March, some of its customers said this week.
For April, the miner sold its
flagship product of 56.4%-Fe Super Special Fines at a discount of 6.5% to
contractual customers, compared with 5% in March, sources said.
For its 58.3%-Fe Fortescue Blend
fines, FMG set its April discount at 3.5%, according to several of its
customers. This was also higher than the 2% offered for March.
FMG was not immediately available
for comment. Previously, the company has declined to comment on queries related
to its pricing policy.
The discounts are applied to a
formula which considers the dry metric ton unit value of the Platts 62%-Fe Iron
Ore Index over a pre-agreed period of time, which can vary from customer to
customer. The discounted figure is eventually multiplied by the actual iron
content of the product.
Customers of the miner said the
bigger discounts were necessary to maintain customer uptake of their main
brands, which occupy the lower-grade category of Australian ores.
"Low grades are flooding the
market," a Beijing-based trader said, referring to the abundant spot supply of
cargoes containing below 60%-Fe.
A Shanghai-based trader added
that there was "a lot of 56-57%-Fe iron ore" at Chinese ports, which affected
the demand for FMG's April-loading cargoes.
The trader added that Chinese
mills were not that willing to take that much low-grade material because of the
stricter environmental regulations laid down by the government. The drive to
reduce polluting emissions levels has made it necessary for steelmakers to
consider using higher quality iron ore.
Additionally, sources also said
that because it was now more difficult to find homes for FMG material, traders
had to add an additional $1-2/dmt flat price discount when reselling Super
Special fines, on top of the 6.5% discount already set by the miner.
For FBF, this additional flat
price discount ranged between $1/dmt and $3/dmt, on top of the 3.5% discount
given by FMG, several traders said.
Source: Platts
Related links:
Fortescue CEO Sees Little Change in Iron Ore Prices for 2014 (2014-03-20)
Fortescue Speeds Up Debt Repayments (2014-01-15)
Fortescue Metals Group Considering Building New Port Hedland Harbour
(2013-12-04)
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