Lump and Pellet still less popular among Chinese mills

Chinese steel mills remain less interested in using higher-priced imported iron ore lumps and pellets procured at ports, even though the growth in prices of these ore types has been less pronounced than that for fines, market sources said on Friday.

"We're still receiving very few bids of lumps or pellets from domestic steel mills in the port market. The mills are preferring to buy fines, as fines are lower grade and are cheaper compared with lumps and pellets," a Shandong-based trader said, explaining the main priority for steelmakers is cutting steel production costs to maintain their margins.

Mysteel's latest bi-weekly survey showed that the ratio of lumps and pellets in the blast furnace feeds of the 64 steelmakers across China which Mysteel tracks had dropped to 11.22% and 15.49% respectively over May 21-June 3 , down by 0.15 percentage point and 0.3 percentage point on fortnight. Conversely, the balance of sintered fines increased to 73.29%, higher by 0.45 percentage point over the two weeks.

Among the pellet feed stocks, most is processed by the Chinese steel mills themselves via their pelletizing machines or purchased from domestic pellet producers, rather than sourced directly from imported cargos, Mysteel Global noted. On the other hand, lumps are mainly imported, as China does not produce lumps.

The accumulation of stocks of lumps and pellets at ports also indicated that the two kinds of ores were less popular among mills, when inventories of fines showed steady declines, the Shandong trader said.

Over May 29-June 4, the inventories of lumps at China's 45 major ports had risen for a tenth week to a 23-month high of 21.4 MnT, up by another 2.1% on week, Mysteel's latest weekly survey showed. Those of pellets also increased to 7.2 MnT at the same time to reach a new high since mid-January 2016 and gaining by 2.5% on week.

However, total inventories of imported iron ore at the ports as of June 4 refreshed a new low since late-October 2016, easing for a seventh week to 107.5 MnT, the survey showed.

Thus, prices of lumps and pellets at port markets had increased slowly given the high level of port stocks and less demand from steelmakers, compared with the growth in prices of fines, Mysteel Global understands.

As of June 4, 62.5% grade PB lumps and 63% Ukrainian pellet in Rizhao port in East China's Shandong province were priced at Yuan 858/wmt ($120.9/wmt) and Yuan 965/wmt respectively, higher by Yuan 55/wmt and Yuan 65/wmt on month, Mysteel's database showed. By contrast, the price for 61.5% PB fines at the same port had surged by Yuan 109/wmt on month to Yuan 760/wmt. The three prices are FOT Rizhao and include 13% VAT.

On the other hand, an official with a steel mill in Northwest China's Shaanxi province guessed that some steelmakers may lift their consumption of lumps slightly if the pace of the price rise for lumps remains slow - at a time when fines are getting more expensive.

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