fmg ore

Australia's Fortescue offers term customers deeper iron ore discounts for Apr
Singapore (Platts)--19Mar2014/635 am EDT/1035 GMT

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 sales

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.


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.

--Celestyn Wong, [email protected]
--Edited by E Shailaja Nair, [email protected]