State iron ore buyer China Mineral Resources Group (CMRG) has told some domestic steelmakers not to engage in discussions with Australia’s Fortescue about a new iron ore product, two sources with knowledge of the matter said on Tuesday.
The demand has stoked speculation that CMRG could impose a purchasing ban on some Fortescue products that concluded earlier this year.
CMRG is in talks with Fortescue over a new term contract and the negotiations are not progressing well, said the sources, who requested anonymity due to the sensitivity of the matter.
CMRG did not immediately respond to a Reuters request for comment. A Fortescue spokesperson said the company continues to engage with CMRG and does not comment on confidential commercial discussions.
Last week Fortescue Metals CEO Dino Otranto characterized the negotiations as an “arm wrestle”. CMRG is looking for better terms for its steelmakers, which have very thin profit margins, while the world’s biggest iron ore miners boast profit margins of between 70% and 80%.
Fortescue has been planning to introduce a new lower-grade iron ore product, dubbed the Fortune Fines. The first shipments are scheduled in July, three separate trading sources said.
But even if a purchasing ban was introduced on this particular product, little impact is expected on prices as it has yet to be launched, traders and analysts said. Some traders said they had not even heard of the product until this week.
The most-active iron ore contract on the Dalian Commodity Exchange finished daytime trade up 0.77% on Tuesday. The benchmark July iron ore on the Singapore Exchange was 0.72% higher in late trade.
The increased scrutiny by CMRG over potential purchases of Fortescue’s new iron ore product steelmakers was first reported by Bloomberg News.
(By Melanie Burton and Helen Clark; Editing by Edwina Gibbs)
