China: High-grade iron ore finds favour with mills as prices soften

• Carajas fines see higher price drop than PB fines
• Port stocks of Carajas fines rise, more set to arrive

Mysteel Global: In recent weeks, some Chinese steelmakers have purchased more Carajas fines – a typical high-grade iron ore product produced by Brazilian miner Vale – eyeing the grade’s better cost performance compared with medium-grade ores such as Pilbara Blend (PB) fines, according to market sources.

Chinese prices of imported iron ore are facing downside risks lately due to the ongoing tariff turmoil, and prices of high-grade ores seem to be softening faster and further than those of lower-grade ores, Mysteel Global notes.

As of 9 April, prices of 65% Fe Carajas fines at Qingdao Port had fallen to RMB 834/wet million tonne (wmt) ($114/wmt), down by RMB 56/wmt from a week earlier. The decline was larger than the drop of RMB 47/wmt recorded in the prices of 61.5% Fe PB fines over the same period, according to Mysteel’s data.

Significantly, the price spread between the two products had narrowed to RMB 87/wmt on 7 April, touching a more-than-a-year low, Mysteel’s assessment showed.

The faster decline in Carajas fines prices was partly driven by the relatively high stocks of the product at China’s ports, with more cargoes of the feedstock set to arrive in the near term, a source revealed.

Besides the better affordability of Carajas fines, another motivation for mills to choose the high-grade iron ore over other medium-grade ores was the mills’ improved business circumstances, a market watcher suggested.

For example, among the 247 steel mills under Mysteel’s weekly tracking, around 55% – or some 137 producers – could earn profits on steel sales as of 3 April. The proportion was higher by 2 percentage points from a month ago and by a marked 22 percentage points from a year earlier.

Given the healthy profit margins and still robust steel consumption, mills are expected to pursue higher hot metal output in the near term, which means their keenness for using higher-grade ores might remain for a while, the source predicted.

Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.