After BHP, China’s CMRG close to iron ore deal with Fortescue

Fortescue Ltd is close to signing a supply agreement with China’s state-backed iron ore buyer, according to a person familiar with the matter, following a BHP Group deal that drew a line under months of talks.

Fortescue, currently in talks, is expected to finalize its long-term settlement with China Mineral Resources Group in the coming months, the person said, asking not to be named as the information is not public. Fortescue is currently operating under short-term agreements that have been extended while the negotiations continue, the person added.

CMRG and Fortescue did not immediately respond to emailed queries.

BHP — which has been locked in a months-long standoff with CMRG over iron ore sales — confirmed last week that it had struck a deal. The world’s largest miner did not provide details on terms and conditions, but the announcement has prompted traders and investors to look for other settlements.

On an analyst call on Friday, Fortescue executives said they had traveled to China earlier that week and met with CMRG. Asked how the miner’s relationship with CMRG might work after a long-term deal is reached, sales and marketing director Ben Kuchel said it was too early to specify the future routine for negotiations.

Bloomberg reported in December that Fortescue and Rio Tinto Group had agreed to extend existing supply agreements with CMRG.

Talks between miners and CMRG have hinged on key issues including pricing benchmarks. Fortescue has already shifted to using an average of China’s Mysteel index and the Argus Iron Ore Index for its products, while its higher-grade Iron Bridge concentrate is priced against the Platts 65% index, according to a presentation from the CMRG research institute in March.

(By Katharine Gemmell)