Chinese steelmakers and traders have been showing renewed interest in procuring iron ore lumps recently, as demand among steelmakers has shown signs of recovering despite the high coke prices, according to market sources on Friday.
“Some steel mills (in North China) have increased their consumption of lumps slightly over the past few weeks,” a Tangshan-based market source close to steel mills said. “When they started to lift their use of lump, the prices were rather affordable to some steel mills, compared to sintered ore and pellets, even with the additional costs for procuring coke,” he suggested.
In fact, experience over the previous several years shows that when local governments in the northern half of the country impose restrictions on steelmaking operations such as sintering to reduce atmospheric pollution in winter, demand for lump and pellet – being alternatives to sintered ore – usually increases. But previously, the steady gain in coke prices since August had dented lump demand among some steel mills, as smelting lump requires a higher coke utilization rate compared to sintered ore and pellets, as Mysteel Global reported.
As of November 19, the price of 62.5% Fe PB Lump at Rizhao port in East China was Yuan 937/wmt ($142.4/wmt), higher by Yuan 33/wmt on week. At the same port, the price of 61.5% Fe PB Fines was Yuan 887/wmt, higher by a milder Yuan 15/wmt on week, while the price of 64.5% Fe Indian pellet was Yuan 1,124/wmt, up Yuan 24/wmt on week. All are in terms of FOT and including 13% VAT, according to Mysteel’s assessment.
Mysteel’s survey also showed a rise in consumption of lump among mills, with lump usage in the blast furnaces of the 247 steel mills Mysteel regularly tracks reversing up to 12.53% over November 5-18, higher by 0.24 percentage point on fortnight. This rate was second highest so far this year, other than 12.61% over September 24-October 9, and was also a relatively high level since Mysteel launched this survey in July 2014.
Meanwhile, over the same survey period the consumption rate of sintered ore in these blast furnaces had declined to a historical low level of 70.8%, down 0.3% from the prior two weeks, while the usage rate of pellet was also up 0.06 percentage point on fortnight at 16.67%, the survey also showed.
The growth in lump consumption among Chinese steel mills lent some confidence to iron ore traders to speculate on lumps, Mysteel Global noted.
A Qingdao-based ore trader confirmed that he had just bought some lump tonnages last week, and that the trading for lumps at some ports in East China had become more active. “I still have a plan to stock some additional quantities. After all, the prices are still acceptable for me now and I bet that lump demand will stay firm during the winter season, especially when the prices of imported pellets have climbed to a rather high level,” he added.
As of November 19, inventories of lump ore at China’s 45 ports had declined for a third week, easing by 159,200 tonnes to reach 25.3 million tonnes, according to Mysteel’s latest data.
Written by Victoria Zou, zyongjia@mysteel.com
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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