New ICX-LP low-phosphorus iron ore index assessed

OREANDA-NEWS. October 11, 2016. Argus' new ICX-LP index was assessed at \\$57.20/t today, equivalent to a \\$1.25/t premium to the Argus ICX 62pc Fe iron ore fines index that reflects quality adjustments in China's traded market.

Argus has launched the ICX-LP index in response to rising supply of 62pc Fe iron ore fines with lower levels of alumina and phosphorus.

Brazilian mining firm Vale has shipped more than 10mn t of Brazilian Blend iron ore fines (BRBF) since May 2015. It is expanding blending to 10 ports in China ahead of the start-up of its S11D project, which will add 90mn t/yr of Carajas fines by 2020. Carajas fines make up more than half of the BRBF blend.

The 55mn t/yr Roy Hill iron ore project in Australia is ramping up to full capacity by early 2017. Roy Hill will ship around 25mn t this year, with around half of that amount going to China.

Fixed-price seaborne trade is still limited for Vale and Roy Hill brands, but China's spot market has matured in its tracking of market-based quality adjustments, allowing for the introduction of a calculated index for this segment.

China's ore production is falling. Chinese output has lower levels of alumina, leaving less room for mills to blend it down in their blast furnace burden and increasing its penalties in spot trade. The rising level of phosphorus in Australian supply is leading mills to more closely track its levels and costs.

The ICX-LP is normalised to a quality of 4.75pc silica, 2pc alumina and 0.06pc phosphorus using quality adjustments to the ICX index, which has a specification of 5pc silica, 2.25pc alumina and 0.11pc phosphorus.

Argus adjustments are 5?/t for every 1 percentage point change in silica content, 45?/t for every 1 percentage point change in alumina content and 22?/t for every 0.01 of a percentage point change in phosphorus content, based on prevailing market valuations.

BRBF has a typical quality of 62.5pc Fe, 5.2pc silica, 1.8pc alumina and 0.07pc phosphorus. Phosphorus content is 0.06-0.07pc for Vale's SSFG and SSFT fines.

Roy Hill fines have a target of 61pc Fe, 4.5pc silica, 2.2pc alumina and 0.055pc phosphorus.

Vale and Roy Hill are seeking premiums for lower phosphorus content, but chemical attributes are only one of many factors affecting spot valuations of brands. Brand relativities also take into account consistency, traded liquidity and market share.

Output from UK-Australian mining firms Rio Tinto and BHP Billiton provides the main liquidity for mainstream seaborne 62pc fines through their Pilbara fines and Newman fines, respectively.

Floating basis trade is becoming more active for Vale and Roy Hill fines.

"A cargo of Roy Hill fines and lump with early October laycan is offered at October index plus 80?/t and plus zero. Compare that with PB fines with similar laycan that is at index plus \\$1/t and plus zero, which is a 20?/t difference for the two fines in the market today," a Beijing-based trader said.