Iron ore futures climbed above CNY 740 per ton, recovering from one-year lows. This rebound was triggered by the China Mineral Resources Group (CMRG), China's state-backed buyer, instructing domestic steel mills and traders not to take delivery of certain Fortescue products, specifically Super Special Fines and Fortune Fines, after July 15. This move effectively tightens the supply of the steelmaking raw material in the world's largest market, despite recent downward pressure on prices due to ample global supply and weakening demand from the steel sector.
The restriction on Fortescue's lower-grade iron ore products (55-58% iron content) is seen as a significant escalation in the ongoing dispute between the Australian miner and CMRG. Negotiations over long-term supply contracts remain deadlocked, and these measures are interpreted as a calculated pressure tactic. Fortescue ships the majority of its iron ore to China and is negotiating supply terms with CMRG, which was established in 2022 to centralize iron ore procurement for Beijing and secure better terms from major mining companies.
The verbal instruction from CMRG applies to portside cargoes of Fortescue's Super Special Fines and Fortune Fines. Industry sources revealed that stocks of Fortescue's Super Special Fines at major Chinese ports stood at 7.22 million tons as of June 30, representing nearly 5% of total portside iron ore stocks. This action follows a previous standoff with BHP that ended in April, highlighting CMRG's campaign to assert control over the iron ore market. The timing is particularly noteworthy as Fortescue is preparing to launch a new product, Fortune Fines, with shipments scheduled from July, and CMRG had previously told steelmakers not to negotiate with Fortescue directly about this new product.
While iron ore prices rebounded, Fortescue's share price saw a dip of approximately 3.1%, indicating market anxiety about its ability to fully capitalize on rising spot prices if key products face restricted access or delayed cargoes. The market reacted with Singapore iron ore futures rising 1.3% to $98.75 per tonne on the news of the cargo delays. Analysts are now anticipating higher discounts on the affected Fortescue products unless the standoff is resolved before the mid-July deadline.
