Substantial reduction in FMG discounts confirmed

Substantial reduction in main 2 products:

SSF - 37% to 33%
FB - 28% to 22%

Kings unchanged at 8%

On a look forward weighted basis, FMG discounts are now only 25.5-26% of the benchmark index.

This combined with the index price in the mid 70s and very low c1 costs thanks to the low AUD and oil prices, fmg will be in a sweet spot it hasn’t been in for some time.

The reduction in discounts I think should prompt an Ann. It is quite material in nature. When discounts were widening, the Mkt was informed accordingly.

https://www.spglobal.com/platts/en/...r-super-special-kings-iron-ore-fines-from-jan

Australia's Fortescue narrows Feb term contract discounts for Super Special, Kings iron ore fines from Jan

• Jun Kai Heng
• EditorNorazlina Jumaat
• CommodityMetals

Singapore — Australian miner Fortescue Metals Group has narrowed the term contract discount for 56.7% Fe Super Special fines and 58.3% Fe Fortescue Blend fines loading in February from the month before, contract customers said Tuesday.



The term contractual discount for Fortescue's 56.7% Fe SSF has been set at 33% against Platts IODEX assessment for February, compared with 37% for January.

The discount for 58.3% Fe FBF has been set at 22% for February, compared with 28% for January, the customers said.

The discount for 57.3% Kings Fines loading in February is unchanged from January at 8% to Platts IODEX, they added.

These iron ore products are priced using Platts 62% Fe IODEX assessment with an adjustment for iron content.

FMG could not be reached for comment Tuesday.

Weak steel margins continue to support end-user demand for discounted fines with lowering the costs of raw materials still a major concern, market sources said.

"There has been more demand for medium grade fines due to restocking before the Chinese New Year holidays. But on the larger picture, steel margins are still low," a Chinese mill source said.

"There is still strong fundamental support for discounted fines," the source added.

"Depressed steel margins are likely to continue through the winter until spring, and without any significant changes in environmental controls, the current preference for low grade fines by smaller mills with more flexible blast furnace blend ratios will continue in the near term," an international trader said.

Market participants also said that the relatively lower price for high grade raw fines has resulted in an increased cost-effectiveness of a high grade-low grade blast furnace mixture.

"Weaker prices for Carajas fines have meant that mixing it with SSF creates a similar performance output to Pilbara Blend fines (PBF) at a cost similar to that of Jimblebar fines (JBF), a Chinese trader said.

The spread between Platts 65% Fe and 62% Fe iron ore index was assessed at $13/dmt Monday, as compared with $14.85/dmt on January 2.

Prices for FMG's discounted fines have steadily increased at the port stocks market, narrowing the spread between prices for low and medium grade fines.

SSF traded at around Yuan 350/wmt at Caofeidian in early-January, before rising to around Yuan 372/wmt on Monday, a market source said. Over the same period, PBF traded at around Yuan 560-562/wmt levels, the source added.