- Strong demand from mills impacts port stocks
- Lumps offer more Fe content compared to fines
Mysteel Global: Stocks of imported iron ore lumps stored at China’s ports have been falling over the past two weeks, causing the volumes to touch a year-to-date low this week. Yet, the tighter supply has lent some support to the country’s lump premium, driving it to close to a two-month high, Mysteel data show.
Since late March, China’s seaborne iron ore lump premium against fines had generally declined, but in recent days, the premium has picked up sharply, with Mysteel’s 62.5% Fe Australian iron ore lump premium against 62% Fe Australian fines in the seaborne market rising to $0.149/dry metric tonne unit (dmtu) as of 21 April, the highest since late February.
Except for a short-lived rally in early April, the inventories of imported iron ore lumps at China’s major ports have been steadily declining over the past two months, sources pointed out. As of April 24, the volume of lumps stockpiled at the 45 major ports monitored by Mysteel had reached 16.7 million tonnes (mnt), a nine-month low, according to Mysteel’s tracking.
The depletion of imported lump stocks in recent months is mainly attributed to strong demand for the feed among Chinese steel mills, Mysteel Global noted. For example, the average lump feed ratio in the 114 Chinese steel mills that Mysteel regularly checks reached a two-month high of 10.88% during April 17-23, the latest survey results show.
“Steel mills prefer to use lumps rather than fines when their profit margins are healthy, “a Shanghai-based iron ore analyst said, explaining that despite being more expensive, lumps offer higher Fe content while requiring less energy during smelting than do fines.
Mysteel’s other survey among the 247 Chinese steelmakers it monitors showed that about 57% or some 142 producers could make profits on steel sales as of April 24, with the ratio higher by 7 percentage points than two months earlier.
Since Chinese steelmakers will continue to maintain high hot metal production in the near future before the summer lull for steel consumption arrives, their strong demand for imported iron ore lumps will persist for a while. For this reason, China’s seaborne iron ore lump premium could enjoy more momentum in the short term, the iron ore analyst predicted.
Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.
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