China iron ore lump premium dips on supply-demand mismatch

Unlike the uptrend it had adopted over the same period in the prior five years, China's imported iron ore lump premium against 62% Fe fines performed weakly so far this year, given that its supply remained stronger than the demand among steelmakers, market sources shared.

As of March 1, Mysteel's 62.5% Fe iron ore lump premium against 62% Fe Australian fines had fallen to a two-month low of $0.093/dmtu, dipping by $0.032/dmtu on month. Also, the premium posted larger declines of $0.26/dmtu and $0.34/dmtu from 2022 and 2021 respectively, the data showed.

China's portside recourses of imported iron ore lumps were rather sufficient after overseas miners beefed up iron ore shipments to consumers in the fourth quarter of last year to meet their half-year or annual guidance, according to a Shanghai-based ferrous analyst.

In particular, the shipments of lumps from mainstream suppliers hit a new high in Q4 2022, thanks to the further ramp-up of production at Rio Tinto's Gudai-Darri and BHP's South Flank iron ore projects, according to her.

Mysteel's survey showed that mainstream suppliers shipped a total of 43.1 million tonnes of lumps during the last quarter, being 10% higher on year. And the volume reached 14.5 million tonnes in January, increasing by 18.7% on year.

As for the demand side, "this year, steel mills' demand for lumps is not so good as it was during the same period last year," the analyst observed.

"In the first quarter, steel mills used to consume more lumps as a substitute for sintered ore and pellets, because there were intensive curbs on mills' sintering and pelletizing operations in winter during the central heating season normally over November-March," she explained, adding that this kind of environmental curbs relaxed somewhat in the fourth quarter last year and so far this year.

In addition, mills' persistent loss on finished steel sales drove them away from higher-grade iron ore products including lumps, Mysteel Global noted.

Consequently, Mysteel's survey on 114 steel mills across China indicated that the feeds of lumps in these mills' blast furnaces dropped by 0.26 percentage point on year to 10.69% on average as of March 1, the latest survey showed.

The mismatch between supply and demand then saw the lump stocks at China's 45 major ports grow by 8% on month and 5% on year to reach 21.5 million tonnes by February 23, touching the highest level since last September, Mysteel's tracking showed.

Written by Lea Li, liye@mysteel.com

Edited by Alyssa Ren, rentingting@mysteel.com

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.