Spot iron lump premium continued to increase this week for the 3rd time in a row. Lump premium which was assessed at USD 0.0625/dry MT unit, CFR China last week has moved up marginally to USD 0.064/dry MT unit, CFR China in 2nd week of 2016.
Which all factors have lend support to spot iron lump premium?
- Environmental concerns in north China-Steel mills in northern province of China are facing pressure from Chinese government for use of high grade material in order to curb pollution and lower emission levels
- Cost effectiveness than other substitutes- Lump premium which was USD 0.185/dry MT unit, CFR China in mid of May’15 fell considerably in last 7 months. Lump premium are still much lower than pellets and thus cost effective than latter
- Sesasonal advantage-Lump gets a seasonal advantage over fines in the winter season especially in north China. Thus lump having low moisture content and higher Fe content are a preferred choice over fines. On the other hand, production of domestic concentrate falls in cold weather thus they are less available for manufacture of pellets. Lump and pellet are mutual substitutes and pellet is processed from concentrates
- Port congestion at some ports in China-Discharge congestion at Hebei Port in China restricted the supply of lump cargoes in China which lend support to the lump prices over there
Spot iron pellet premium stable at USD 10.6/dry MT unit
Spot iron pellet premium remained stable this week too at USD 10.6/dry MT unit for Fe 65% BF grade pellets. However, there were some signs of buying seen for the imported pellet cargoes as winter season has hampered the market of domestic concentrate cargoes.
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