China's high-medium Fe iron ore price spread narrows

Mysteel's tracking showed that the spread between 65% Fe Carajas Fines and 61.5% Fe PB Fines at Qingdao port had narrowed to Yuan 97/wmt ($14.1/wmt) as of April 17, down by Yuan 10/wmt on month and Yuan 93/wmt on year, as the price of the former product performed weaker than the latter, market sources shared.

By April 17, the price of 65% Fe Carajas Fines at Qingdao port dropped to Yuan 982/wmt, an on-month decline of Yuan 48/wmt - sharper than the Yuan 39/wmt drop in the price of 61.5% Fe PB Fines which reached Yuan 885/wmt on the same day, according to Mysteel's assessment.

Recently, domestic steelmakers and iron ore traders have gradually lost buying interest in higher-Fe grade iron ore products such as Carajas Fines that gained their favor in early March when mills enjoyed healthy steel margins and were eager in ramping up output, according to a Shanghai-based market watcher.

"It's different now because more mills are losing money in selling finished steel and their previous motivation in lifting steel output wanes," she observed.

For example, the average loss on rebar sales suffered by steelmakers in North China's Hebei province deepened by another Yuan 49.9/t on week to Yuan 150.3/t as of April 14, Mysteel's latest survey showed.

Also, Mysteel's other tracking on 247 blast-furnace steel mills showed that only 47.6% of them enjoyed margins on finished steel sales by April 14, 10 percentage points lower on month.

The current steel production at mills is pretty high now, and the room for them to further lift output will be limited given their poor steel margins and the slack demand among downstream users, the source explained.

"The further large increase in steel output will only worsen supply-demand imbalance and drag down steel prices, thus eroding mills' margins more significantly," she said.

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.