Spot lump premium continuous to strengthens due to positive steel margins and tighter port stocks.
In Week 19, spot lump premium assessed at USD 0.2130/DMT, CFR China. Premium has increased continuously from Oct’15 to now. However, on W-o-W basis, premium moved 2.5%. In Week 18, it was at USD 0.208/DMT, CFR China.
As global iron ore as well as steel prices have moved down from past 1 weeks, but the steel margins still remain positive, supporting lump market. Hence, spot lump premium continuously increased.
Alongside, lump supply from ports was tight resulting in strengthening premium. There was thin availability of lumps at major stock ports. Stock of lump cargoes was recorded at 10.7 MnT on 06 May’16. The figure declined from 11.3 MnT last week (as on 29 Apr’16).
In coming term, spot lump premium may further increase as Chinese mills may have to substitute lump with pellet or concentrates in order to reduce sinter usage which is a high polluting material. Steel mills in Tangshan need to cut emissions by at least 50% April 29-May 2, as the city plays host to key events held during the Tangshan International Horticultural Exposition and uses maximum amount of sinter to produce steel.
Pellet premium stable at USD 21/DMT, CFR China
In week 19, spot lump premium continuous stable at USD 21/DMT, CFR China for Fe 65%BF grade pellets. Decent steel profit margins continued to lend support to pellet demand.
Chinese steelmakers are trying to use more pellet instead of lumps these days due to higher iron content and can be used directly in blast furnaces.
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