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Fortescue narrows May iron ore discounts

16 Apr 2018, 12.32 pm GMT

Fortescue narrows May iron ore discounts

Singapore, 16 April (Argus) — Australian iron ore producer Fortescue Metals has narrowed the discounts for May index-linked contract iron ore cargoes in response to higher prices in China's portside secondary markets.

Fortescue's May discount for 56.7pc SSF fines will narrow to 39pc from 40pc for April, while 58.3pc blended fines will narrow to 34pc from 35pc, Chinese market participants said.

Fortescue prices its contract sales to China at a discount to the 62pc fines reference index.

Portside SSF fines narrowed their average discount to the Argus 62pc Fe PCX to 39pc in March compared with an average 40pc in February. Month-to-date SSF is pricing at a 38pc discount, or 168 yuan/wet metric tonne (wmt), to the PCX that has averaged Yn448.91/wmt in the month to date.

SSF discounts could narrow further. The PCX fell by Yn7/wmt to Yn445/wmt today. The SSF differential narrowed by Yn8/wmt to Yn164/wmt below the PCX, or an outright price of Yn281/wmt that is a 36.9pc discount to the PCX.

The decision of India's coastal state of Goa, a key supplier of low-grade fines, to suspend iron ore mining indefinitely from 15 March may have lifted demand for SSF fines in China. Lower profit margins could also be prompting steel mills to shift to sub-58pc fines to cut costs.

Fortescue last month cut its iron ore price realisation forecast to 65pc of the 62pc Fe benchmark from a previous 70-75pc for the 2017-18 fiscal year ending 30 June.

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