Australia's FMG sells FB fines at wider discount to major customers in Feb Singapore (Platts)--12Feb2014/130 am EST/630 GMT
Fortescue Metals Group, Australia's third-largest iron ore producer, has sold its Fortescue Blend Fines at a bigger discount to major contractual buyers for February-loading cargoes compared with January, customers of the miner said this week.
FMG uses Platts 62%-Fe Iron Ore Index assessment to price its ore, making a price adjustment for the iron content for each grade, and typically offers its contract customers a discount that depends on market conditions.
For February, the Australian miner sold its flagship product Super Special Fines at a discount of 4% to contractual customers, the same level as in January, sources said.
But for Fortescue Blend Fines, most contractual buyers were offered a discount of 1.5% in February, the same as in January, some major customers were heard to have been given a wider discount Platts Steel Markets Daily is a leading source for iron ore prices, scrap metal prices, and iron ore news. It is the only publication that publishes global metallurgical coal spot prices on a daily basis and contains two iron ore price benchmark assessments in one report: Platts IODEX and TSI 62% iron ore.
A contractual mill customer in central China said that buyers offered a bigger discount for FB fines had probably made an advance payment last year to secure a steady supply of contractual volumes.
FMG has been allocating extra volumes to contract customers as it has increased its production capacity to 155 million mt/year in 2013, from around 120 million mt/year in 2012.
The Tangshan spot billet price, a widely watched gauge of steel fundamentals in China, was Yuan 2,790/mt ($457/mt) on Tuesday. The last time physical billet prices hit this level was on September 4, 2012, and iron ore prices had plummeted to $89/dmt, according to Platts data.
When asked to comment on the issue, Byron Vale, Perth-based spokesman for FMG, replied in an email with "Fortescue has no comment." MARKET MIXED ON RESELLING POTENTIAL
A few traders said they had managed to get additional premium for FMG cargoes when reselling to spot customers, though most said this was not possible because demand remained lackluster in the midst of a supply glut and weak steel demand.
A trader, who is a major term customer of FMG, said he was able to get a premium of $0.50-0.80/dmt when reselling Super Special and Fortescue Blend fines and described it as "quite narrow."
A Beijing-based trader said, however, that "if a trader has FMG cargoes on hand now, he will definitely make a loss." He added that some traders even offered FMG cargoes at a discount of $0.50-1/dmt to spot buyers to lure buyers.
A Zhejiang-based trader agreed, saying there was "so much transparent knowledge" over just how much FMG low-grade material there was in the market, and that supply was adequate.
"Traders, as resellers of FMG material, would aim to only maintain the FMG-set discounts when they're selling on the spot market, and just hope to break even without losing money," the trader said. "Spot premiums are almost impossible."
FMG started producing FB fines in July last year. The grade, which has an iron content of 58.3%, is a blended product from the Solomon and Chichester firetail mines in the Pilbara region and was slated to replace the 57.5%-Fe Special Fines which would eventually be phased out, the company said previously.
FB fines contain indicative levels of 2.5% alumina, 5.5% silica, 0.075% phosphorus, 0.035% sulfur, and 7.5% loss on ignition, said a source at a mill in central China.
Super Special Fines, which has an iron content of 56.4%, contain indicative levels of 2.8% alumina, 6.4% silica, 0.06% phosphorus 0.045% sulfur, and 8.3% loss on ignition.
Sources said that FMG typically offers its contract customers three different pricing periods based on the Platts 62%-Fe IODEX assessments -- a monthly average, 10 working days after the date on which the Notice Of Readiness is issued at the discharge port or a five-day period before and after the date on which the NOR is issued at the discharge port. Several sources said the last option was most preferred.
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