China mills still favour medium to high-grade iron ore

Chinese steel mills are still preferring certain quantities of imported medium- to high-grade iron ore fines because for many mills, the prices of these grades are still relatively affordable compared with the alternative of smelting higher-grade iron ore fines mixed with lower-grade fines, market sources have noted.

The trend is seen lending partial support to prices of those medium- to high-grade fines products such as PB Fines, Newman Fines, Mac Fines and Jimblebar Fines, compared to the higher-grade iron ore products including Carajas Fines and lower-grade such as Super Special Fines (SSF), Mysteel Global noted.

As of July 14, Mysteel assessed the price of 61.5% Fe PB Fines at Caofeidian port, for example, at Yuan 847/wmt ($121.2/wmt), up Yuan 37/wmt on week, while the price of 65% Carajas Fines at the port was Yuan 969/wmt, only up Yuan 6/wmt on week. SSF ore at the same port was priced at Yuan 690/wmt on Tuesday, higher by Yuan 25/wmt on week. All prices include 13% VAT.

"Yes, the price of Carajas Fines has become less firm - or even verging on softening - amid the recovery in availability. But the issue now is that, generally speaking, the absolute prices of all iron ore products are hovering at a relatively high level," an iron ore procurement official with a Tangshan-based steel mill in North China's Hebei province remarked.

"So if we consider that the longer rainy season this year may dampen domestic steel demand further and drag down steel mills' profits, some makers are very likely to implement further stricter controls on their raw materials costs," he explained. "Under this scenario, consuming more medium- to higher-grade iron ores currently may be the better choice," he told Mysteel Global.

Another iron ore procurement official with a Hebei-based steel mill confirmed that in his mill's case, adding higher-grade iron ore products was not under consideration now, as the margins on finished steel are not so good at the moment so management is not keen to pursue higher output. "In fact, though supply of Brazilian iron ore has been recovering recently, available quantities at some ports - especially those in North China - are still limited," he added.

Mysteel's data showed that as of July 9, the stocks of Australian iron ore at 45 Chinese ports reversed down by 1.58 million tonnes or 2.6% on week to about 59.9 million tonnes - a new low since mid-September last year. By contrast, as of the same date, the stocks of Brazilian iron ore had increased for a fourth consecutive week, rising by another 1.4 million tonnes or 6.4% from June 24 to about 23.9 million tonnes. Nevertheless, the volume remained at a relatively low level.

For the time being, the continuing firm demand for iron ore among Chinese steel mills and the general optimism regarding the Chinese economy have lent consistent support to imported iron ore prices. By July 15, Mysteel's PORDEX 62% Fe Australian Fines stood at Yuan 858/wmt FOT Qingdao and including the 13% VAT, remaining at a high level since early last August, though still Yuan 44/wmt lower on year.

However, on the same day, China's price of HRB400 20mm dia rebar was at Yuan 3,816/tonne including the 13% VAT, lower by Yuan 254/t on year, according to Mysteel's assessment.

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