Australia’s Rio Tinto to lower iron content of flagship Pilbara Blend Fines as ore quality weakens

Rio Tinto, the world's top iron ore exporter, plans to lower the iron content of its flagship Pilbara Blend Fines product, citing the gradual quality degradation of its orebodies, its customers told Platts, part of S&P Global Energy.

PB Fines has a typical iron content of 61.6% and market participants have said this would be adjusted below 61% Fe. This would imply a rise in alumina and silica content, although specific figures for them could not be obtained.

Rio Tinto didn't respond to an emailed request for comment.

The change, which could take effect as soon as June, was not surprising, market participants said. It is normal for mineral quality degradation to occur over time as the best and most easily accessible parts of an orebody are first exploited and depleted, sources at a Chinese trader and a Chinese steelmaker said.

Rio Tinto would be the second major producer after peer BHP to announce a downgrade in product specifications in recent months, with the latter having lowered the iron content of its flagship Mining Area C Fines and Newman High Grade Fines, among other products, effective July 1, Platts reported.

"If the iron content [of PB Fines] were to fall below 61%, that would make BHP's MAC Fines nearly on par with it," said a second Chinese trader source. Since July, MAC Fines has had a typical iron content of 60.6%.

Other than the headline iron content that defines a product's chemical properties, others have, however, noted that PB Fines and MAC Fines would likely differ in terms of metallurgical properties.

"The metallurgical properties of PB Fines are still much better than those of MAC Fines," a second Chinese mill source said. "You can't really compare based on just Fe content; in the short term, MAC Fines or other medium-grade fines won't be able to immediately replace PB Fines."

A source at an international trader said that PB Fines' degradation could bode ill for other producers of medium-grade fines, as they could have to widen the discounts that applied to their products to the benchmark IODEX to match its new specifications from a pricing perspective.

Steelmakers' preferences for different raw materials may vary depending on their installed technologies and access to alternatives, including other sinter feeds and direct-charge material. They may also differ based on their individual coke-making and steelmaking economics.

Steelmakers to reevaluate mix

The change in specifications would make steelmakers reevaluate their procurement mix as they would want to ensure that they achieve the most cost-effective sinter blend given the available supply, and as steel margins have remained weak or in negative territory, market participants said.

"We're still pending an official notice from Rio Tinto on the specification adjustments to PB Fines," a third Chinese trader said. "If the adjustments are confirmed, PB Fines premiums over the next two months will likely find support, as grades like 61.3% and 61.6% Fe will no longer be available."

Platts assessed the premium of PB Fines over the April futures contract at 70 cents/dmt on March 28.

Steelmakers have shifted toward using more low-grade and non-mainstream fines over the past year as they seek to lower input costs amid an unfolding property market downturn in China and elevated crude steel output.

Some market participants said they'd seen signs of reduced PB Fines offers in the spot market this year from how, since fourth-quarter 2024, there had been fewer primary deals involving Rio Tinto as a seller.

Rio Tinto sold 16 spot cargoes of PB Fines in Q4, compared with 21 in Q3 and 28 in Q4 2023, data compiled by Platts showed.

Conversely, direct sales of its lower grade 58% Fe SP10, or Supplementary Product 10, fines crept up to seven shipments in Q4, compared with just one or two a year ago. Some took this to indicate that the miner was finding it harder to make up enough PB Fines cargoes based on the quality of the ore extracted and could only sell what was available as SP10.

SP10 is mined from the same orebodies as PB Fines, according to Rio Tinto's website.

"While there's only been mention that the quality will be reduced, I think it would indirectly also impact the shipment volumes for both PB Fines and SP10 Fines," a fourth China-based trader said. "I suppose the market would return to seeing more PBF cargoes and perhaps fewer SP10 Fines like in the past."