After BHP, China’s CMRG close to iron ore deal with Fortescue
Fortescue Ltd is close to signing a supply agreement with China’s state-backed iron ore buyer, according to a person familiar with the matter, following a BHP Group deal that drew a line under months of talks.
Fortescue, currently in talks, is expected to finalize its long-term settlement with China Mineral Resources Group in the coming months, the person said, asking not to be named as the information is not public. Fortescue is currently operating under short-term agreements that have been extended while the negotiations continue, the person added.
CMRG and Fortescue did not immediately respond to emailed queries.
BHP — which has been locked in a months-long standoff with CMRG over iron ore sales — confirmed last week that it had struck a deal. The world’s largest miner did not provide details on terms and conditions, but the announcement has prompted traders and investors to look for other settlements.
On an analyst call on Friday, Fortescue executives said they had traveled to China earlier that week and met with CMRG. Asked how the miner’s relationship with CMRG might work after a long-term deal is reached, sales and marketing director Ben Kuchel said it was too early to specify the future routine for negotiations.
Bloomberg reported in December that Fortescue and Rio Tinto Group had agreed to extend existing supply agreements with CMRG.
Talks between miners and CMRG have hinged on key issues including pricing benchmarks. Fortescue has already shifted to using an average of China’s Mysteel index and the Argus Iron Ore Index for its products, while its higher-grade Iron Bridge concentrate is priced against the Platts 65% index, according to a presentation from the CMRG research institute in March.
China’s state iron ore buyer allows purchases of banned BHP portside cargoes
China’s state iron ore buyer has lifted its ban on purchases of certain BHP ore products that had piled up at ports, four sources with knowledge of the matter said on Tuesday.
BHP Group, the world’s third-largest iron ore supplier, and state buyer China Mineral Resources Group (CMRG) have concluded a contract negotiation that ended a months-long ban on purchases of the company’s iron ore, BHP said last week.
The ban was lifted for mainly seaborne products and its removal followed a visit by BHP executives.
Steelmakers can now buy and take delivery from ports previously frozen BHP products such as Jimblebar fines – a type of medium iron ore – after submitting a report to CMRG, said the sources, speaking on condition of anonymity.
Traders also were notified that they could sell their Jimblebar fines at ports, said one of the sources.
The most-traded iron ore contract on China’s Dalian Commodity Exchange (DCE) ended morning trade down 1.02% at 779.5 yuan ($114.18) a metric ton.
Last September, CMRG banned purchases of BHP’s Jimblebar fines, followed by the miner’s Jinbao fines last November and Newman fines in March.
Jimblebar fines stocks at 15 major Chinese ports were 8.69 million tons as of April 22, 382% higher than in late September, two separate traders with knowledge of the matter said last week.
CMRG and BHP did not immediately respond to Reuters requests for comment.
($1 = 6.8271 yuan)
(Reporting by Reuters staff; Editing by Kim Coghill and Christian Schmollinger)
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