Australian producer Fortescue Metals' West Pilbara fines (WPF) has been offered in China's portside markets at levels close to MACF and JMBF price levels.
WPF was offered at 620 yuan/wet metric tonne (wmt) free on truck basis Rizhao port yesterday, which is a seaborne equivalent of $83/dry metric tonne (dmt) cfr China.
"The offer is probably from a mill. There is no trade so far," a Hebei-based steel mill buyer said.
WPF was offered at Yn615/wmt at Rizhao port today.
Fortescue launched the new product 60.3pc Fe WPF in late 2018 with its first test shipment to Chinese steel producer Hunan Valin in December. Discounts for the test shipments escalated the more cargoes a buyer took, with one shipment at a 5pc discount to the 62pc fines index, two shipments at a 7pc discount and three cargoes at an 8pc discount, Chinese traders said.
WPF has a typical specification of 60.3pc Fe, 4.7pc silica, 2.3pc alumina and 0.075pc phosphorus.
The portside offer is high but close to price levels for 61pc Fe MACF and 61pc Fe JMBF that have specifications closest to WPF, the mill buyer said. JMBF sold at Yn608/wmt in Shandong yesterday, he said.
WPF is closest to MACF which has a typical 4.7pc silica and 2.25pc alumina. JMBF has a typical 4.4pc silica and 3pc alumina.
Chinese mills facing narrow or negative profit margins are cutting costs by favouring lower priced iron ores. This has narrowed floating discounts for lower priced medium-grade fines like JMBF, MACF and Roy Hill fines, as well as for sub-60pc Fe fines like 56.5pc Fe super-special fines (SSF) and 58.3pc Fe Fortescue Blend fines (FBF) in spot trades and monthly contract adjustments.
This shift has reduced demand for low-alumina Brazilian ores like BRBF, preventing any spikes in premiums in the wake of mining firm Brazilian mining firm Vale's dam accident in January and supply cuts. JMBF and Roy Hill fines have been more popular recently, a Beijing trader said.
JMBF sold today at a $4.50/dmt floating discount on the Globalore online trarding platform, while MACF sold at a $2.50/dmt floating discount on the Corex platform, around $1/dmt narrower than earlier this year.
Argus seaborne brand differentials for MACF and JMBF have narrowed to 7pc and 10pc this week from 8pc and 12pc in January respectively.
Off screen a trading firm sold today a combined cargo of MACF and JMBF at floating discounts of $3/dmt and $5.50/dmt to the March 62pc index.
FMG intends to sell WPF through long-term contracts to mills and so far it has signed with several mills, said an east China mill buyer, adding that Fortescue will ship around 20mn t of WPF in 2019. "We have not tested WPF in sintering, but if the performance is good, I think most mills will use it in sintering rather than sell in portside markets."
Fortescue last month said it will produce 8mn-10mn t of WPF in the 2018-19 fiscal year to 30 June, up slightly from previous guidance of 5mn-10mn t. The 30mn t/yr Eliwana mine that will start up in 2020 will support WPF shipments of around 40mn t/yr. WPF will replace around half of the 75mn t/yr of FBF exported mostly to China.
