BHP Billiton sells first Newman Blend iron ore lump via negotiations

2013-12-12

BHP Billiton, the world's third-largest iron ore producer, sold last Thursday its first Newman Blend Lump cargo through bilateral negotiations, the miner's customers said Wednesday. This was ahead of the start of NBL offers, which are expected in January next year, they added.

The miner sold 63.2%-Fe Australian NBL at a premium of $0.315/dry mt to the January average of the Platts 62%-Fe Iron Ore Index assessments, with a price adjustment for iron content. The 70,000-mt parcel will load over December 25-January 3 from Port Hedland.

"This is the first time we have seen an NBL cargo appearing on the spot market and this is coming ahead of January, which was when we were initially told to expect NBL offers to start," a Hebei-based BHP customer said.

BHP Billiton's Melbourne-based spokeswoman Eleanor Nichols declined to comment on the matter.

The Hebei-based customer added that "a portion" of the first quarter term lump supply that BHP Billiton will export to its contract customers would be made up of NBL material, with 63.6%-Fe Newman lump and 62.4%-Fe Mining Area C, or MAC, lump being phased out gradually.

"Starting from Q1, we will see a larger proportion of NBL cargoes, and that will mark the start of the eventual phase-out of separate Newman and MAC lump material," the customer said.

NBL material is made up of a blend of Newman, MAC and Jimblebar lump. A mill based in central China received indicative specifications of 1.35% alumina, 3.45% silica, 0.02% sulfur, 0.078% phosphorus and 4.6% loss on ignition.

Some of BHP Billiton's customers said NBL's quality was expected to be quite stable.

"It should be easy for any mill familiar with using Newman lump and MAC lump to utilize NBL in their blend for steelmaking," a Chinese steelmaker said.

Several end-users based in North China said it was difficult for spot and term lump premiums to ease because the cold weather was pushing down domestic concentrate production, making imported lump cargoes attractive. Lump and pellet cargoes can be mutually substituted, with the latter processed through the process of pelletization from concentrate material.

"It's a good time for BHP Billiton to start selling NBL as there's good demand for lump cargoes now and premiums are going to stay firm for a considerable period of time," a source at a steel mill in eastern China said.

A large contractual customer located in eastern China said NBL will serve to improve "logistical efficiency for BHP Billiton" as it would find it easier to sell a single product to buyers instead of offering a wide range of choices.

"Buyers will generally prefer Newman lump for its higher iron content [compared with other lump products BHP Billiton produces], but by offering one single product that's a blend, it can ensure the sales of other lump products better than if they were sold separately."

A source at an international trading house that buys term cargoes from BHP Billiton said the miner had said it would increase the production of lump material in 2014, and the new blended product would be a good way to "ensure maximum allocation of its additional capacity."

Source from : Platts

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