Iron ore lumps premiums, which were traversing record high levels in July this year (plus price), in a reversal, have plunged to unprecedented lowest levels. SteelMint’s data reveals the lump premium, has fallen from a high of $0.76/tonne (t) for the Fe62.5% towards end June’21 to as low as $0.03/t in the third week of Sept’21. In fact, the premium started on a declining trajectory from early Sep’21 and has been languishing at $0.03/t levels since the middle of the current month.
The premium soared in July due to an increase in Chinese iron ore imports, but now it has plummeted due to a decrease in the imports. This movement underlines the fact that the iron ore market is at the mercy of China.
There are no buyers. Environmental pollution counter-measures were the catalyst for Chinese blast furnace manufacturers to rapidly increase imports of lump ore this year. Due to restrictions on the operation of sintering machines that use powdered ore, the use of lump ore that does not require a sintering process has increased sharply. Inventory increased due to rapid expansion of imports. However, it seems the delay in inventory adjustment has become apparent in the current phase of China’s production cuts.
Met coke impact
When reducing sinter and increasing lump ore, it is common to use more coke than in normal operation. Coking coal prices are currently skyrocketing in China. The price of coke for metallurgy is also rising. These developments have also led to decreased use of lump ore.
The main supplier of lump ore is Brazil’s Vale. The company supplies iron ore pellets to blast furnace mills in Europe and Asia. The Spot pellet premium for Fe 65% is currently assessed at $58/dmt for Fe 65% pellet.
Iron ore imports into India resume on falling lump premium & global prices – A few iron ore import bookings into India were heard lately, whipping up speculation as to whether more such deals could be in the offing. These deals have surfaced after a gap of around eight months with last import parcels seen in Jan’21, at 0.14 million tonnes (mn t) and at 64,000 tonnes in Dec’20.SteelMint learnt from reliable sources that two vessels of Kumba South African iron ore of Fe 64.5%, have been booked, both by southern India-based companies. One vessel is of 55,000 tonnes while the other is of around 35,000 tonnes. Prices for both deals are hovering at $113-114/t CIF Krishnapatnam.
Outlook
Japanese blast furnace mills also use lump ore and pellets. However, many of the lump ores were contracted before the premium plunge. In addition, it has been decided that the October-December loading of fines ore will reach a record high ($182/t), and the current situation is that it will not be possible to enjoy the spot depreciation for the time being.
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