By: Reuters

23/06/2014

Top miners deepen iron ore discounts to China as supply grows

SHANGHAI/SINGAPORE - Global miners Rio Tinto and Fortescue Metals Group are making deeper cuts in prices of low-grade iron ore cargoes to China, as competition heats up in the world's top buyer amid rising supply.

The move underscores the iron ore market's move into surplus as big producers, such as Rio and BHP Billiton, ramp up output, overwhelming demand growth in China. The reductions will eat into profits that have already been eroded by weaker prices.

Iron ore has fallen by almost a third in 2014 after years of lofty prices that swelled earnings for mining giants, while Chinese steel mills have wound back long-term supply contracts in favour of cheaper spot cargoes.

"Since many Chinese steelmakers have cut and cancelled annual contracts with miners, that has prompted miners to lower prices to keep their customers," said an official with a steel mill in northern China who had confirmed discounts with Australia's Fortescue.

Rio Tinto, the world's No. 2 iron ore miner, is offering clients with annual contracts a discount of 17 cents per dry metric tonne unit for its Australian Robe River 56.9% grade fines, a granular form of iron ore, said a steel mill official who has spoken to Rio.

This equates to a discount of about 13%, if based on this month's Platt's 62% iron ore index, compared with a discount of 6 percent from November 2013 to June 2014, sources with direct knowledge of the matter said.....

Top miners deepen iron ore discounts to China as supply grows