Vale shifts away from higher-silica iron ore sales
Singapore, 17 November (Argus) — Brazilian mining firm Vale will cut sales next year of its southern system iron ore fines, which are receiving heavy discounts for their higher silica levels.
Chinese mills increasingly prefer SSFG and SSNG cargoes because of wide discounts for silica compared with Vale's 65pc Fe IOCJ fines. Vale wants to reduce shipments of the lower-margin ores and use more of the fines for its blended product, which receives a higher premium.
"Vale is planning to cut the supply of SSFG and SSNG of this year's unexecuted portion of long-term contracts with mills. They are in talks with mills about this," an east China trader said. "The reason is the current high silica discount makes the mining firm reluctant to sell large volumes."
Prices for SSFG and SSNG are quite competitive, said the trader, who received an offer of SSFG with mid-December laycan at a $13/t discount to the December 62pc index today. Another trader in south China received an SSFG offer at a $12/t discount to December index for an early-November laycan cargo.
Vale's new 90mn t/yr S11D mine will produce 22mn t of Carajas fines in 2017, its first year of operations. The mine is producing ore with 65-66pc Fe content that Vale can use to blend with southern system fines for its 63pc Fe BRBF blended fines. Vale's sales focus has shifted to blending more ore in China, with operations at 11 ports and a target of around 46mn t to be blended in China this year. That compares with around 22mn t/yr blended at its Telak Rubiah ore terminal in Malaysia.
Vale has also launched a low-alumina SFLA blend this year, of which it has sold 4mn t so far.
Vale's average Fe content increased to 64.1pc in the third quarter from 63.8pc in the second quarter.
S11D is also enabling Vale to increase the Fe level of its IOCJ spot cargoes to 65.7pc from previous levels that were typically closer to 65pc Fe. IOCJ was offered off-screen last week with a specification of 65.72pc Fe, 1.67pc silica, 1.18pc alumina and 0.07pc phosphorus.
The Argus 65pc index rose to $82/t cfr Qingdao today, a 30pc premium to the 62pc ICX index at $62.75/t, or $6.42/t per 1pc additional Fe.
Vale increased its output by 6.5pc to 275.16mn t in January-September. The company expects 2017 output to be closer to the lower end of its 360mn-380mn t guidance, and is maintaining a long-term target of 400mn t/yr.