It is reported that Australia's largest steel maker BlueScope Steel is canceling iron ore shipments and reportedly cutting jobs ahead of a difficult second half.

It cancelled on Wednesday three shipments of iron ore pellets that were scheduled for delivery this month under a contract with Australian Bulk Minerals, which is merging with Grange Resources subject to shareholder approval.

The unlisted Tasmanian miner said it would sell the spare 130,500 tonnes of the bulk commodity to other customers at a price lower than what BlueScope would have paid, slashing $8.77 million from its cashflow.

It is understood BlueScope cancelled the shipments as part of moves to use cheaper iron ore fines instead of pellets to lower its steel input costs.