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Sydney, Oct 21, 2008 (ABN Newswire) - Small Western Australian miner, Australian Atlas Iron, has joined the growing group of Australian iron ore producers which have reported tougher times in China.
Mount Gibson and Fortescue are two other exporters said to be trying to do deals with Chinese iron ore buyers to help them over the slump in demand.
So far BHP Billiton and Rio Tinto, the industry majors, haven't reported any problems with shipping or other arrangements on their Chinese ore deals.
Fortescue says there has been no renegotiation of its contracts, but there have been media reports that the company is trying to assist Chinese buyers in some way where they are experiencing problems.
And Mount Gibson said almost two week ago that some of its suppliers were having trouble.
Mount Gibson said it was under no obligation to help the buyers, but will work with them to try and provide some sort of assistance.
Atlas told the ASX yesterday that mining operations at its Pardoo iron ore project in Western Australia will be rescheduled to ensure its product remains competitive amid weakening demand for the steelmaking commodity.
The company said weakening demand and volatility in the iron ore market had led the group to reschedule mining operations to "optimise grade and contaminants in order to ensure that the Pardoo product remains competitive".
Economic uncertainty and tighter credit has led to a softening in demand for iron ore and prompted a reduction in steel production and the build-up of stockpiles at Chinese ports.
Rio Tinto said last week that Chinese demand for steel-making raw materials had slowed, while Mount Gibson Iron Ltd, Australia's fifth largest iron ore producer, said a number of its customers had requested delays to shipments.
Shares in Atlas Iron had dropped 26c, or 23.6% to 84c in morning trading, before rising a touch to finish down 22c, or 20% at 88c. Mount Gibson edged up 3.5c, or 7.6% to 49.5c.
Atlas Iron said it still was planning to begin exports with lower grade, easily accessible ore for shipping by early December, but warned that it would be subject to "prompt execution of a sales agreement".
The company said off-take negotiations were proceeding with a "small number of short-listed parties", with a contract announcement expected in the short term.
Atlas's Pardoo project is 75 km east of Port Hedland in the Pilbara region of northern WA. It is expected to produce about one million tonnes of iron ore a year.
Fairfax Media papers reported at the weekend that Fortescue was working to renegotiate the shipping price of its iron ore contracts and not the contracted price.
"Fortescue Metals Group has been forced to renegotiate iron ore delivery contracts with some struggling Chinese customers, as plunging steel prices push higher-cost mills to crisis point.
"FMG has locked in shipping freight contracts for a little over half of its customers and has contracted to pass on those costs to customers in China.
"But some mills have been stranded by tumbling shipping freight prices, which have fallen from a peak of $US50 ($A72) to as low as $US9.
"Last night FMG said it was "juggling" shipping schedules and renegotiating freight contracts to help some buyers.
"Clearly there are some mills in China that are tighter than others, and smaller ones are more tightly constrained than others," said executive director Russell Scrimshaw.
"We'll continue to work with our customers on the shipping price, which is entirely different to the contract price.
"Let me just state categorically that not one customer is getting a discount from the benchmark price for the iron ore."
Mount Gibson sparked the concern about China's iron ore purchases on October 9 with this comment:
"Mount Gibson has however received requests from a number of its customers to delay hematite ore shipments scheduled for the second quarter of the financial year.
"Mount Gibson has no obligation to agree to any of the relevant customers' requests. In this regard, each customer has entered into binding long term ore sales agreements and is contractually obligated to take delivery of the shipments allocated to it in the second quarter.
"Customer and iron ore sector analysis indicates a slow down in demand for iron ore in China due to current economic uncertainty and the tightening of credit facilities, leading to reductions in steel production and the current significant build-up of iron ore stockpiles at Chinese ports.
"Mount Gibson will endeavour to reach an acceptable accommodation in respect of its long term shipping schedules with its contracted customers and take the necessary steps to minimise any disruption that may result to operations.
"Mount Gibson is well placed to modify operational objectives, project objectives, associated expenditure and production targets should this be required and will advise the market as to the possible impact on it operations once discussions with customers are more advanced."
This came a week or so after reports surfaced in India that iron ore suppliers there were having trouble with some Chinese buyers not taking delivery of contracted tonnages or not taking up contracts at all.
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