The proposed iron ore blending tie-up between Fortescue Metals Group and Vale, underlined by a memorandum of understanding between the two parties signed in March 2016, is now "looking less likely," Fortescue Metals Group said Monday.
While negotiations are continuing between the mining giants, discussions have been at a slower pace than originally anticipated, it said.
Vale's president Murilo Ferreira had said on December 1 at an investor forum in London that negotiations were "very poor."
Several sources said that while the potential tie-up would be a strong competitor in the medium grade iron ore fines market, it may prove to be difficult to implement.
"Vale is focusing on marketing their Brazilian Blend fines and Southern System materials in the medium grade fines tier," a central China mill source said.
Moreover, sources also said the recent surge in demand for Vale's 65%-Fe Carajas iron ore fines due to the exponential rise in the metallurgical coal and coke markets, had provided Vale an unprecedented premium for the high grade material.
The spread between Platts' 65%-Fe and 62%-Fe IODEX widened to its highest point for the past two years at $13.10/dmt on November 23 compared to $3.59/dmt on average for the first half 2016.
This in turn may have limited the upside for Vale from the deal, as FMG's material stands at the lower end of the Fe spectrum, sources also said.
FMG's flagship materials Fortescue Blend and Super Special fines typically 58.3%-Fe and 56.7%-Fe respectively and correspondingly has higher impurities.
