The recent climb in domestic finished steel prices across China has led most domestic steel mills to enjoy rather healthy steel margins. In turn, this has lent support to prices of steelmaking raw materials, especially iron ore. That support has been so strong that significant falls in ore prices are hard to imagine, and in fact, momentum building for prices to rise from this month.
On April 7, for example, the national price for HRB400 20mm dia rebar as assessed by Mysteel refreshed its 9.5-year high to reach Yuan 5,128/tonne ($785.4/t). Although the price had eased marginally to Yuan 5,100/t by April 14, it was still higher by Yuan 362/t on month. In parallel, during the month to April 14, Mysteel PORTDEX 62% Australian Fines in Qingdao had recovered to Yuan 1,174/wmt FOT and including the 13% VAT, also up Yuan 36/wmt on month.
For the time being, many Chinese rebar producers are enjoying margins of around Yuan 700/t, with some even over Yuan 1,000/t. It’s these very healthy margins that are encouraging steel mills to maximize their steel output, and this is what has bolstered iron ore demand.
Mysteel’s data also showed this trend, with blast furnace capacity utilization among the 247 Chinese steel mills Mysteel tracks remaining largely stable over April 2-8 at 86.94%. In this context, market watchers say iron ore prices seem to have no reason to fall.
Meanwhile, Chinese steel mills are also consuming more higher-grade iron ore products to squeeze as much pig iron from their furnaces as possible.
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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