Australian mining giant Rio Tinto has settled its quarterly iron ore lump premiums for April-June at around $0.229-0.23/dry metric ton unit with a number of Chinese steelmakers, mill sources said Thursday. This is down from the $0.285/dmtu range inked by a majority of mills with Rio Tinto for the first quarter of this year.
Lump premiums vary from mill to mill, but customers of the miner said they were mostly offered a second-quarter lump premium of $0.23/dmtu which some steelmakers accepted, while others settled at the slightly lower level of $0.229/dmtu.
Rebecca Murphy, a Perth-based spokeswoman for Rio Tinto, declined to comment on the matter Thursday.
The varying lump premiums are linked to factors such as supply volumes and how long the mills have been doing business with the miner, sources said.
A source at a mid-sized steelmaker in North China said the company eventually had to agree to a lump premium of $0.229/dmtu by Rio Tinto, although it did so reluctantly as spot lump premiums are lower than that. Platts assessed the weekly spot lump premium price at $0.205/dmtu on Wednesday, down $0.005/dmtu week on week.
"We tried to avoid taking any term lump cargoes for Q2, but they [Rio Tinto] told us that if we still wanted to continue being able to get term fines, we would have to take a proportion of term lump at the +0.229/dmtu premium they set for us," said the source.
A source at an Anhui-based steelmaker said the company had to accept the lump premium set by Rio Tinto as the company's offtake volumes were not big enough for them to have much bargaining power.
A source at a major state-owned steelmaker in East China said "different mills have different methods of negotiating with the miners", but added that a lump premium of $0.229-0.23/dmtu was "representative" of what most mills in the country accepted from the miner.
The source conceded, however, that the company had managed to obtain a more competitive Q2 lump premium "closer to the $0.20/dmtu level", but said that would not be reflective of what most other mills obtained.
Other large steelmakers in China, meanwhile, are still attempting to push the Q2 lump premiums lower and have not wrapped up negotiations with Rio Tinto.
A source at a large northern Chinese steelmaker said the company had received an offer of $0.23/dmtu from Rio Tinto, but due to the large volumes of term lump cargoes it lifts, discussions were still ongoing for an "additional advantage" on top of this premium. He declined to provide more details but said the company was trying to negotiate for a better deal.
The source did say, however, that if the company was unable to negotiate down from the +0.23/dmtu level offered, it would be forced to cut its Q2 offtake volumes from the miner.