Fortescue Metals Group, Australia's third-largest iron ore miner, has offered deeper discounts to its major contractual customers for May-loading cargoes of its main products compared with April, some customers said Tuesday.

The miner sold its flagship product of 56.4%-Fe Super Special Fines at a 7.5% discount to contractual customers for May, compared with 6.5% for April, sources said.

For its 58.3%-Fe Fortescue Blend fines, FMG set its May discount at 4.5%, according to several customers, from 3.5% settled for April.

FMG could not immediately be reached for comment. Previously, it has declined to comment on its pricing.

The discounts are applied to a formula that considers the dry metric ton unit value of the Platts 62%-Fe Iron Ore Index over a pre-agreed period of time, which can vary from customer to customer. The discounted figure is eventually multiplied by the actual iron content of the product.

Customers said the miner raised the discounts to entice demand, given significant pressure on spot prices of FMG material amid abundant supply.

FMG exported 126.5 million mt of iron ore in 2013 and reached a 155 million mt/year production capacity target at the end of March, CEO Nev Power said in late March.

Power said the 155 million mt annual run rate would be sustained through the fiscal year ending June 30, 2015.

Traders said reselling Super Special and FB fines cargoes on the spot market was proving challenging because of the abundant supply, and they have had to offer additional flat price discounts on top of FMG's monthly discount rates.

A Shanghai-based source at a state-owned trading house said previously that it was difficult to persuade customers to buy more Super Special fines even with FMG's increased discount levels every month.

"We see pretty consistent demand for [57.6%-Fe] Yandi fines, and they're popular with mills, but for Super Special fines, it's really hard to move volumes on the spot market."

Yandi fines material is a lower-grade flagship product mined by Australian mining giant BHP Billiton that trades relatively frequently on the spot market.

A Hong Kong-based trader added that he was "avoiding" buying FMG cargoes lately because they were proving "so hard to sell despite the higher discount levels."

Source: Platts

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