Australian miner Fortescue Metals Group has increased the contract discount for 58.3%-Fe Fortescue Blend iron ore fines for cargoes loading in December at 29% discount against Platts IODEX, up 3.5 percentage points compared with November, FMG's term contract customers said Friday. 

The discount for FMG's 57.3%-Fe Kings fines for December loading also rose to 15%, up 3% percentage points on the month, they added. 

For its 56.7%-Fe Super Special fines, the discount stood at 40% for December-loading cargoes, unchanged on the month. 

These iron ore products are priced using Platts 62%-Fe IODEX assessment with an adjustment for iron content. 

"It is not a matter of price anymore. No one wants low grade fines so there has been little liquidity," said a Singapore-based trader. 

"Contracted customers are finding it difficult to re-sell these low grade cargoes, it is understandable that FMG has increased the discount," a Hebei-based mill source said. 

Low grade ore appeared to be less attractive in China as end-users were preferring high grade feedstock to ensure hot metal productivity, especially during the winter. 

According to the public announcement on the Chinese Ministry of Industry and Information Technology website, 50% of steel mills production in related "26+2 cities" will be cut during November 15, 2017, to March 15, 2018. The actual cut was between 25% to 80% according to sources, depending on the mills' location, heating requirements and the impact of pollution. 

The spot price of square billet in Tangshan was at Yuan 3,810/mt ($577.09/mt) ex-stock Tangshan Thursday, up Yuan 40/mt on the month. 

This in turn led to tightness in steel supply and a subsequent lift in margins, causing mills to choose fines of medium iron content to feed their blast furnaces. The spread between 65%-Fe and 62%-Fe assessments stood at $16.75/dmt, down from $17.45/dmt on the week, indicating that mills were cautious about picking up expensive material which may dent their margins overall. It was also down $8.45/dmt from its peak at $25.20/dmt on September 27, 2017. 

"We are hesitant to buy Carajas now because the price is still unattractive," an eastern mill source said. 

FMG could not be reached for comment. 

FMG had initially settled 58.3%-Fe Fortescue Blend cargoes for November loading at 23%, but subsequently revised this upwards to 25.5%. 

Sources said FMG typically offers contract customers two pricing periods based on S&P Global Platts 62%-Fe IODEX assessments -- a monthly average or a five-day period before and after the date on which the Notice of Readiness was issued at the discharge port.