Australian iron ore major Rio Tinto is in negotiations to lower the term discount for its August-loading 57%-Fe Robe River fines to 15.5 cents/dry metric ton unit, compared with a discount of 17 cents/dmtu for July-loading cargoes, some term customers of the miner said Friday.
Rio Tinto prices its Robe River ore at the Platts 62%-Fe Iron Ore Index for the month of loading, and typically offers its contract customers a discount that depends on market conditions.
The miner's move to lower discount levels comes relatively quickly after it switched to using flat price discounts for its Robe River ore in mid-June -- from a percentage-based discount system -- applying these discounts to its July-loading cargoes. Robe River fines were discounted at 17 cents/dmtu while 57%-Fe Robe River lump cargoes were discounted at 18 cents/dmtu for July.
It is not known if Rio Tinto is planning to lower the discount level for August-loading Robe River lump.
A Perth-based spokeswoman for Rio Tinto did not respond to an emailed request for comment Friday.
However, not all Robe River term customers of Rio Tinto have received official notification from the miner on the lower discount level for August-loading fines cargoes, and those which have are still in talks over the matter.
A source at a major term buyer of Robe River fines in northern China said that negotiations with Rio Tinto on the August discount level were ongoing, but he added that most mills would likely not have much room for negotiation.
The source said the narrowed discount level would likely be "implemented soon and made official."
"For us, we buy quite a lot of [Robe River fines] from the miner, so maybe we'll be able to negotiate more, but there are other mills who have already accepted this lower discount."
A source at Hebei-based mill said: "We are still receiving our term cargoes at the old 17 cents/dmtu discount and have yet to hear from Rio Tinto on any changes."
The easing of discount level for August-loading Robe River fines surprised some mills, while others said it was expected.
"Frankly speaking, we were surprised when Rio Tinto told us Robe River fines discounts were being lowered as there is so much low-grade Australian ore around," said a source at a central China steelmaker, referring to a supply glut created by the continued influx of Fortescue Metals Group's low-grade iron ore into the market.
FMG has been steadily deepening its monthly term discounts for both 56.7%-Fe Super Special and 58.3%-Fe Fortescue Blend fines material since the start of this year, largely due to its mining expansion and increased output. In January, Super Special fines were sold at a discount of 4%, while FB fines were sold at a discount of 1.5%, compared with current discounts of 15% and 9%, respectively, for August-loading shipments which were announced Tuesday. The discounts are also basis the Platts 62%-Fe IODEX. But other sources said they had expected the August discounts for Robe River fines to be lowered because of improved demand for low-grade ores with high loss on ignition levels.
"Rio Tinto is probably giving lesser discounts for Robe River for August because we're seeing all the high LOI cargoes like [57.6%-Fe] Yandi fines starting to get better prices," a Singapore-based trader said.
Term buyers of Robe River fines said the LOI level was around 10.4% typically for the product. Yandi fines, mined by rival Australian major BHP Billiton, typically have an LOI level of 10%.
"High LOI levels will make the sintering process [of iron ore fines] faster," said a source at a Chinese steelmaker. "It's very useful in speeding up the process, especially when domestically-mined Chinese ores with poor sintering qualities are in the mix. This is why brands like Robe River and Yandi are popular for their LOI."
