Singapore — Rio Tinto has started actively selling a new medium grade of Australian iron ore fines, RTX fines, with Chinese traders and steel mills picking up the cargoes, industry sources said late last week.
A total of around five Capesize cargoes loading in July and August are expected to arrive at Chinese ports, according to the sources.
RTX fines is largely a blendstock for Rio Tinto's flagship product, Pilbara Blend Fines, and was seldom sold separately until the last week,sources said.
In separating RTX fines for direct sales, Rio Tinto is looking to improve the overall quality of PBF, which is the single largest medium-grade fines brand volume-wise, in its iron ore portfolio, market sources said.
A Rio Tinto spokesman declined to comment Monday.
PBF is widely used by Chinese steel mills and is the most traded producton the iron ore market, in terms of spot market volume. PBF has, historically, tended to trade at a premium to the monthly average of Platts IODEX, but this year, due to the increasing alumina penalty, PBF has started to trade at a discount to the monthly average of IODEX.
RIO TINTO OFFERS LOWER ALUMINA CONTENT FROM JULY
Constriction in supply of Brazil-origin low alumina cargoes has led mainstream Australian fines with comparatively higher alumina to bepunished. Several sources confirmed they had received notice from Rio Tinto that from July 2018, the alumina content of PBF would be lowered.
"Rio Tinto told us that it was planning to lower the alumina content in PBF closer to the 2.3% level, which would be better than current loading specifications," a steel mill source from Tangshan said.
RTX fines loading in July and August were reported to have traded at a discount of $13-$14/dmt against the IODEX July and August average, which was lower than other mainstream medium grade Australian fines on the market.
The current offer price of the product was understood to be a discount of$10/dmt against IODEX, sources added.
Two Chinese buyers who bought the RTX fines cargoes told S&P Global Platts they thought it was cost-effective to take the cargoes.
"Our own steel mill can use this cargo with no problem. The specification is close to Jimblebar Fines (JMBF) and it was $3-$5/dmt cheaper than JMBF, which is quite attractive to us," one of the buyers said.
The RTX fines cargoes sold have typical specifications of: 61% Fe, 4.2% silica, 3.1% alumina and 0.13% phosphorous. RTX is therefore considerably higher in silica, alumina and phosphorus than PBF.
Sources were not sure if the supply of RTX fines would continue in the long term or not.
"It doesn't matter much on the stable supply, since we won't use it as the main sintering fines in our blast furnace. It won't impact our procurement much," the mill source said.
According to market sources, the specifications of RTX fines meets the delivery rules of Dalian Commodity Exchange, which means the imported RTX fines cargoes could be delivered to the DCE 1809 contract.
Platts last assessed 1% alumina for medium grade iron ore at $8.5/dry mt on June 29, up from $1.7/dmt February 1, 2018.
