Vale adds Argus as index option for 65pc iron ore fines

Brazilian mining firm Vale is offering the Argus ICX 65pc Fe iron ore index in contracts for the first time, as part of the industry's shift to widen pricing options, Chinese mills said.

A major north China steel mill said it began using the Argus 65pc index as part of a basket of indexes in its 65pc Fe Carajas iron ore (IOCJ) fines contract with Vale earlier this year. The Argus 65pc index is among several index options that Vale is giving steel mills for a two-index basket, mill contacts said.

A south China mill is negotiating with Vale for a basket of indexes, with Argus among the options, a manager at the mill said. The mill wants to use a basket index, in line with the China iron and steel association's (Cisa) push for more indexes to be used by mining firms. "It will help keep price reporting agencies objective and transparent," the manager said.

IOCJ has higher Fe levels and lower silica and alumina relative to other mainstream fines. This makes it a favoured option for mills in Japan and South Korea, as well as for larger Chinese mills that are increasingly shifting towards higher-grade fines and pellet.

Heavy rains on Vale's northern system have constrained IOCJ supply since the second half of 2019, increasing prices. The Argus 65pc index has widened its premium to more than 20pc to the Argus ICX 62pc index from 2019 lows of around 5pc in September-October. The 65pc index has held above the $100/dry metric tonne (dmt) for most of this year but fell by $3.40/dmt to $99.55/dmt yesterday.

Spot trade in the 65pc segment is already following the baskets in contracts.

Argus in early March reported an off-screen spot sale of 400,000t IOCJ that was traded at a $1.70/dmt premium to the April average of a basket of Argus 65pc and Fast Markets MB65pc Fe indexes (AMB65). On 20 March, 50,000t of IOCJ was offered at $2/dmt above April AMB65 to a north China mill.

Cisa has called for more iron ore pricing options, and major producers last year reiterated support for basket and brand indexes.

Australian mining firm BHP was the first major producer to use a basket of indexes in 2014, indexing to an average of Argus and TSI. It expanded its use of basket pricing in spot sales and contracts last year.

Australian mining firm Rio Tinto used the Argus ICX index for the first time in a spot sale in March 2019.

By Chris Newman, Kitty Xie and China staff

65pc index to 62pc ICX iron ore fines diff %