FMG lowering discounts for contracted shipments from September

Fortescue Metals Group (FMG), Australia’s third-largest iron ore miner, will lower price discounts for contracted iron ore shipments from September.

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“FMG used to sell 56-57% Fe Super Special Fines with a 3% discount to 58% iron ore index price, and 57-58% Fe Special fines with 1.5% discount. It will lower the discounts to 2% and 1% respectively, for contracted customers from September onwards,” a trader close to an FMG-contracted steel mill, told Steel First.

“The [iron ore] market now is buoyant. It is a good time for FMG to raise prices,” another trader in Shanghai said.

Spot iron ore prices have gained traction since the beginning of the month. The Metal Bulletin 62% Fe iron ore index stood at $140.02 per tonne cfr on Monday August 12, up 7.4% since the start of the month, and up 26% from a year-low of $110.79 per tonne cfr on May 30.

“FMG has been under financial strain, and it will definitely seek to raise its iron ore sales prices whenever it is able to,” an industry analyst in Shanghai said.

The company struggled to finance its projects last year after the dive in spot iron ore prices. It suspended the development of its 40 million-tpy Kings iron ore deposit in the Pilbara region for four months in September.

The miner also recently lost a high court challenge against Australia’s mining tax. The minerals resource rent tax, which came into effect on July 1 2012, applies to coal and iron ore miners making annual profit above A$75 million ($67 million).

FMG is now aiming to bring its Kings project onstream by the end of the December quarter, boosting its total production capacity to 155 million-tpy.