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Rio Tinto offers first fixed price tender for Pilbara Blend iron ore fines in 2 months

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Rio Tinto offers first fixed price tender for Pilbara Blend iron ore fines in 2 months

Singapore — Australian miner Rio Tinto floated a spot tender Friday for 170,000 mt of 61% Fe Pilbara Blend fines (PPF) CFR Qingdao on a fixed price basis, loading December 3-12, from Dampier, closing at 3.15 pm Singapore time.

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As of 5:30 pm Singapore time, the company had still not announced the conclusion of the tender.

S&P Global Platts data showed that all prior spot cargo sales of PBF by Rio Tinto from September were sold on a floating price basis except for one trade done on November 9, compared with 87% of PBF trades being sold on a fixed-price basis from January to August this year.

The change in pricing basis for PBF occurred as the 62% Fe Iron Ore Index rose from $66.15/dmt CFR Qingdao on August 31 to a peak of $77.25/dmt on November 9, and then went down gradually.

Over the same period, Platts data showed a strong rise in floating price trades for PBF cargoes. Index-linked trades went up from a discount of $0.35/dmt on September 5 to an all-time high premium of $3.75/dmt on November 14.

Increasing price volatility and strengthening prices for medium grade fines had created uncertainty over the near-term price direction for medium grade fines, leading to a preference for index-linked floating price trades, market sources said.

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Given the strong surge in iron ore prices in October, there was a high risk of a price correction, a Hebei-based procurement source said. "It is preferable to buy floating price cargoes, as prices can be rather volatile during the winter season," the source added.

The change in pricing strategy was seen by some market sources as a possible signal of a continued weakening trend in iron ore prices in December.

"Medium grade prices have been weakening over the past few days, and a seller's preference to utilize a fixed price basis for a trade might indicate that they expect prices to continue falling during the same month period," a Chinese trader said.

According to Platts data, the last fixed price tender for PBF was concluded on 31 August at $64.32/dmt, with the 170,000 mt cargo loading from October 4-13 from Dampier.

--Jun Kai Heng, jun.kai.heng@spglobal.com

--Lu Han, lu.han@spglobal.com

--Edited by James Leech, newsdesk@spglobal.com