China Premium on Imported Iron Ore Lumps at 3-Month High

The price of imported iron ore lumps in China's major markets was still firm as of October 14 while that of fines has lost considerable ground of late, new Mysteel data shows. As of Monday, Mysteel's 62.5% grade lump premium against 62% fines had risen to a three-month high of US cents 23/dmtu and making for a near 50% gain since September 20, Mysteel's database showed.

Market observers attributed the increase mainly to the limited volumes of tradeable lump resources at ports currently, especially at those in East China, compared with the more than adequate inventories of fines at the ports.

"The stocks of lumps at ports are low, but their consumption in blast furnaces remains high," a Shandong-based trader in East China explained.

Moreover, among ports along the Yangtze River mainly in East China's Jiangsu province, stocks of lump are relatively lean yet the demand from local mills is also high, explained another market source in Shanghai who expected that the premium on lumps against fines will continue to increase in the short term.

Taking PB Lump and PB Fines as examples, as of October 14 the price spread between Mysteel's FOT price for 62.5% PB Lumps and 61% PB fines at Qingdao, Shandong, had surged over the prior week to Yuan 108/wmt ($15.3/wmt), 24% higher than that on October 8, the first working day after the end of the National Day holiday break, according to the database.

Chinese steel mills have increased the use and procurement of lumps since mid-August, as Mysteel Global reported. Even though the price of lumps has recovered from the early September, they are still popular with mills because they remain cheaper compared with other ores.

On the other hand, lumps seem to have fallen out of favour with steelmakers in Tangshan (in North China's Hebei province) recently as domestic iron ore pellets are considered by these mills to be more cost-effective, a Tianjin-based in North China disclosed, adding that inventories of lumps in North China ports are relatively sufficient.