- Price spread narrows between medium, low grades
- Mills avoid higher grades amid cost-cutting focus
Mysteel Global: China’s blast-furnace steelmakers continued to show a strong preference for medium- to low-grade ores, particularly for lower-grade products such as Super Special Fines (SSF). As a result, the price spread between medium- and low-grade ores has generally narrowed, Mysteel Global notes.
For example, the spread between 56.5% Fe SSF ore from Fortescue Metals Group and 61.5% Fe Pilbara Blend (PB) fines from Rio Tinto at Qingdao Port under Mysteel’s tracking was RMB 132/wet metric tonne (wmt) ($18/wmt) on 14 May, smaller than the RMB 144/wmt a month ago.
The narrowed gap was primarily attributed to the larger increase seen in SSF prices than that in PB fines. By 14 May, prices of 56.5% Fe SSF at Qingdao Port rose by RMB 26/wmt m-o-m to RMB 646/wmt, while the increase in prices of 61.5% Fe PB Fines at the same port over the same period was just RMB 14/wmt, according to Mysteel’s assessment.
Behind the faster growth in SSF prices was the fact that China’s steelmakers still favour cheaper iron ore products, despite mills’ healthier profit margins. In fact, when mills can enjoy healthy profit margins, they usually raise their usage of high-Fe grade ore to lift their steel output. However, these days, steel producers are more cautious about purchasing high-grade iron ore, and cutting costs remains their priority, a Tangshan-based source explained.
“We are seeing that the SSF inventories held by local traders are relatively low now, as this product is quite popular among local steelmakers,” she said.
Moreover, arrivals of SSF ore in the near term will be modest, which means prices of the feed material will continue to enjoy more upward momentum from tight supplies, the source added. Under this scenario, the price spread between SSF and PB fines is expected to narrow further, a Shanghai-based iron ore analyst predicted.
Significantly, the preference of Chinese steelmakers for low-grade iron ore fines has also caused a decline in the average grade of the sintered ore feeds they produce. Mysteel’s tracking of the 112 Chinese steel mills showed that the Fe ratio in the sintered ore they added into their blast furnaces had fallen to 55.15% during 8-14 May, the lowest since Mysteel started the survey four years ago.
Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.
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