BHP narrows Nov iron ore discounts across all medium-grade fines

Australian iron ore miner BHP has narrowed discounts for term contracts across their flagship fines brands -- Jimblebar Fines (JMBF), Mining Area C Fines (MACF) and Newman Fines -- for November, its contract customers said Oct. 23.

The monthly term contract discount for MACF narrowed from $4.58/dmt in October to $4.34/dmt in November, while Newman High Grade Fines (NHGF) saw its discount narrow from $2.57/dmt to $2.15/dmt over the same period. The steepest change was in BHP's JMBF, where the discount narrowed from $7.85/dmt to $7.28/dmt.

BHP was not immediately available for comment, but most market sources were unfazed by the discount changes.

"The preference is still very much on the discounted cargoes, so JMBF narrowing the most make sense," a Chinese trader source said. “But even then, the adjustment is subtle, which is good because the market can benefit from some stability in the brand levels."

Another northern China-based iron ore trader said the “market is in favor of more competitively economical feedstock, so it’s natural for low to medium-grade fines discounts to show a narrower level on the month”.

“There's been plenty of non-mainstream and discounted cargoes on the market recently as well, which may also be a reason why BHP was more cautious with the narrowing levels of their products this time around,” another trader source said. “They need to consider what gives them a competitive edge as well.”

Meanwhile, the focus among mills remains to cut existing costs, so sintering fines would be preferred over direct charge materials, according to market sources.

“Physical demand fundamentals [are] not yet picking up, so attention would be more toward low-grade fines, rather than lumps,” said a China-based iron ore trader.

Platts, part of S&P Global Commodity Insights, assessed 58% Fe Iron Ore Index at $86.10/dmt Oct. 23, and the 62% Fe Iron Ore Index at $98.25/dmt Oct. 23.

NBLU discounts widen on weak fundamentals

On the other hand, the November term contract discounts for the Newman Blend Lump Unscreened (NBLU) widened to $3.44/dmt, up slightly from $3.38/dmt in October.

Most market participants welcomed the widening discounts for the lump brand, citing various factors contributing to bearish lump fundamentals.

“In the current situation, lump demand hinges largely on speculative demand, with some players taking positions. We will have to wait and see if there is any actual impact of environmental controls, particularly with the low steel production levels recently,” a trader source said.

China-based trader sources also said lump materials are still considered a premium product, and a marginally wider discount would only be reasonable, considering existing fundamentals, with stockpiles at Chinese ports adding pressure.

An eastern China-based trader said landing margins for NBL, both screened and unscreened, have not been doing well, hence “discounts have to be slightly more, with demand focal point around low to medium-grade lump blends now".

“Overall, lump port inventories have been on the high, and demand uptick is much slower compared with the rate cargoes are arriving on the ports, so it is only reasonable to reflect a lower lump price,” an end-user source said.

“Overall seaborne lump demand has been weak so it does make sense for discounts to be slightly higher, or else it wouldn’t be as competitive,” said a Singapore-based iron ore trader.

Platts assessed the iron ore spot lump premium at 14 cents/dmtu Oct. 23, Commodity Insights data showed.