Fortescue narrows May SSF fines discount to 11pc

Australian iron ore producer Fortescue Metals has narrowed the discount on its 56.5pc Fe SSF fines for May index-linked shipments.

SSF fines will be priced at an 11pc discount to the May 62pc index, down from a 13pc discount for April index-linked cargoes, Chinese traders said. The decline tracks the closing of the discount in portside trade, driven by mills shifting to lower-cost ores and reduced spot supply available to Chinese traders.

The Argus-assessed yuan-denominated SSF fines has traded at an average discount of 15pc to the Argus PCX portside index so far this month, compared with a 17pc discount in March. The narrowing has continued through April, with SSF trading at a 13.4pc discount to the PCX on 18 April.

SSF port inventories are low and Chinese trading firm RGL has limited supply of tradeable SSF to sell into the market, a trader said. Fortescue is reducing SSF shipments with its focus more on higher Fe ores, another trader said. This reduced supply comes as weak profit margins push mills to rely more on lower-priced ores.

SSF shipments fell to 12.6mn t in the January-March quarter, down by 26pc from a year earlier and lower by 21pc from the previous quarter.

Discount on the 58.3pc Fortescue blended fines (FBF) widened by 1pc to 8pc below the May 62pc index, traders said. January-March FBF shipments fell by 19.5pc to 16.1mn t from the previous quarter.

The 57.3pc King's fines discount widened to 4pc to the May 62pc index from a 5pc discount to the April 62pc index. January-March Kings fines shipments rose by 6pc to 3.4mn t from the previous quarter.

Fortescue put the monthly discount for its new 60.1pc Fe West Pilbara Fines (WPF) at 4pc below the May 62pc index, traders said. Fortescue last week maintained its production guidance for WPF at 8mn-10mn t for 2018-2019. It shipped 3.8mn t of WPF in January-March, or about 10pc of a total 38.3mn t of shipments for the quarter.