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Brazilian mining giant Vale, currently the world's largest producer of iron ore, has narrowed the discount for its November-loading main Southern System iron ore products to $4/dmt from October's $4.70/dmt discount.
Vale prices these Southern System brands -- Standard Sinter Feed Guaiba and Standard Sinter Feed Tubarao fines -- basis the Platts 62%-Fe Iron Ore Index for the month of loading for its term customers.
Sources said Vale began talking about narrowing the term discount for SSFG and SSFT material around the end of October, as demand and sales inquiries for such cargoes were doing quite well then.
"In the period more than two weeks ago, demand for SSFG and SSFT was still pretty good, and even port stocks sales were doing well," a Singapore-based customer of the miner said.
"At that time, customers were more accepting of a narrower discount as there was still no confirmation of steel output cuts among northern [Chinese] mills for APEC. It was also not known when the cuts would take place and to what degree steel production [would be affected]."
Ahead of and during the APEC conference that took place in Beijing for around a week starting November 5, the Chinese government mandated the idling of many blast furnaces and the shutdown of sintering facilities among many mills in the region.
Many mills in the steelmaking hub of Hebei, including some major players like Shougang, Guofeng Iron & Steel and Jinxi Iron & Steel, had to cut steel production by almost half on orders to lower emissions.
This then caused a tumble in the buying of iron ore fines, in particular products like SSFG and SSFT that contain higher silica levels than higher grade products like Brazilian Iron Ore Carajas fines from Vale's Northern System mines, as well as some of the other more liquid Australian mainstream material like Pilbara Blend fines and Newman fines.
Ores with higher impurity levels contribute greater to polluting emissions in the steelmaking process.
The Singapore-based Vale customer said that in the past week, with end-users having to grapple with steel cuts, sales for SSFG and SSFT fine had "not been as good as they were prior to that."
But with the narrower term discount already in place, he said that customers just had to accept it as it was for the whole month.
Additionally, a Hong Kong-based trader said Vale might have narrowed the November discounts because they realized that mills were no longer "that sensitive to [higher] silica levels" in their blends for production.
An increasing number of Chinese mills have said this year that their tolerance for ores with higher silica has grown as they had become more adept to dealing with degradation in most ore grades in recent years.
"Generally, there has been a growth in demand for higher-silica material over this year," another trader said.
An official from Vale's Singapore office declined to comment on the November discount.
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