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Fortescue widens discount for blended fines

23 Nov 2017, 9.03 am GMT

Fortescue widens discount for blended fines

Singapore, 23 November (Argus) — Australian iron ore producer Fortescue has widened the discount for its blended fines in December, while leaving discounts for SSF fines unchanged.

Discounts for the firm's 58.3pc blended fines increase to 29pc to the December 62pc index compared with 25.5pc for November index-linked cargoes, Chinese market participants said.

The discount for 56.7pc SSF fines is unchanged at 40pc to the December 62pc index.

The discounts could widen further if Chinese buyers push back and demand bigger cuts. Iron ore demand is expected to fall next month, with most mills in north and east China cutting output from 15 November on Beijing's orders.

Fortescue also widened its blended fines discount in November, while the SSF fines discount was last increased in October.

The company has limited room to expand the SSF fines discount any further, as traded prices are quite close to its cost levels, said a Hong Kong-based trader.

The link between sub-60pc Fe products and the 62pc Fe benchmark is breaking down as productivity and environmental concerns drive sales of higher-grade fines. Supply of mainstream 62pc Fe fines, such as PB fines and Newman fines that form the core of most 62pc indexes, is much tighter than supply of sub-60pc Fe products which has been boosted by large exports from countries such as Australia and India. Producers of sub-60pc Fe material are seeking alternative methods of valuing and pricing their products.

Argus started assessing portside prices of Fortescue SSF fines at Shandong ports in September, reflecting increasing sales of the product in portside markets. The Argus-assessed SSF fines price closed at 286 yuan/wet metric tonne yesterday, the seaborne equivalent of $36.15/t assuming 8pc moisture. This was a discount of 44.4pc to the Argus ICX price for 62pc seaborne fines, which was assessed at $65.05/t.

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