Lower-grade iron ore contract prices will narrow or erase discounts in July, as spot differentials have gained further support from supply disruptions, product upgrades and margin pressures.
UK-Australian mining company BHP will narrow discounts for July monthly contracts for 60.5pc Fe Jimblebar fines (JMBF), 60.8pc Fe Mining Area C Fines (MACF) and 57.1pc Fe Yandi fines, Chinese market participants said.
The JMBF floating discount will narrow to 4.5pc below a June 62pc index from 7pc in June. MACF will price flat to index compared with a 0.5pc discount in June. The Yandi fines floating price will narrow to a 3.5pc discount to a 62pc index from 5.5pc in June. Floating prices are on a 62pc Fe basis.
BHP increased the typical Fe content for JMBF to above 60pc Fe from 1 July by revising its mining plan.
Australian iron ore producer Fortescue Metals narrowed discounts for its monthly contracts for the fourth time in five months.
Fortescue’s newest product 61.2pc Fe West Pilbara Fines (WPF) will price flat to a 62pc index in July compared with a 1.5pc discount in June. WPF had priced at a 5pc discount in February.
July-loading 56.5pc super-special fines (SSF) cargoes will price at an 11pc discount to a 62pc index, down from 13pc in June, Chinese market participants said.
The July discount for 58.3pc Fe Fortescue blended fines (FBF) will narrow to 6pc from 7pc in June.
The contract adjustments follow similar trends in spot markets.
Seaborne iron ore prices have held above the $100/dry metric tonne (dmt) cfr Qingdao level since late May on the back of Brazilian ore supply disruptions, including producer Vale’s temporary shutdown of its Itabira complex.
The Argus ICX 62pc index has risen by $19.80/dmt, or 24pc, to $101.20/dmt since early April.
With limited upside for steel prices, mills are cutting costs to preserve margins and the effect has been a narrowing of differentials for both high-grade and low-grade ores to 62pc and 65pc fines indexes.
SSF on a 62pc basis traded at a 5.9pc discount to the PCX 62pc portside index in Qingdao yesterday, less than half the 11.4pc discount at which it started off June.
The narrowing of discounts attracted the first platform deal of Atlas fines yesterday at a 4pc discount to a July 62pc index.
The 65pc fines index priced at more than a 20pc premium to the ICX index in early May but nearly halved to around a 13pc premium to the ICX yesterday at $114.50/dmt cfr Qingdao.