Lump feeds in Chinese mills' blast furnaces at 4-year high

Mysteel's tracking among 114 Chinese steel mills indicated that domestic steelmakers have used more lumps in their melts, with the lump portion in their blast furnaces increasing to a four-year high of 74.05% on average by April 6, up by 0.18 percentage point on week and 0.85 percentage point from the prior month.

Iron ore lump has gained more favor among some steel mills in regions such as North and East China, with the trading of some Australian lumps in the seaborne and portside iron ore markets picking up gradually, observed a Shanghai-based market insider.

"Mills raised their lump usage as the recent declines in Chinese coke prices made lumps more cost-effective when compared to other iron ore feeds," he explained.

Generally, higher lump feeds into blast furnaces mean higher consumption of coke than sintered iron ore feeds and pellets, Mysteel Global understands.

So far this month, some major steel mills in North and East China had succeeded in cutting a total of Yuan 100-200/tonne ($14.5-29/t) in their coke procurement prices, and the most recent reduction was made on April 10, as Mysteel Global reported.

As a result, China's coke prices have begun to weaken since early April, with the national composite coke price assessed by Mysteel dropping by Yuan 129/t on month to Yuan 2,559.3/t and including the 13% VAT by April 11, touching a new low since last November.

Mills particularly cared about controlling their production costs when their steel margins shrank recently, and some said they may continue to procure more lumps if coke prices remain on the downtrend, according to the Shanghai source, adding that many iron ore traders noted mills' growing interest in lumps and then increased their speculative buying as well.

Boosted by improved demand among mills and traders, Mysteel's 62.5% Fe iron ore lump premium against 62% Fe Australian fines climbed steadily to reach a four-month high of $0.151/dmtu on April 11, $0.058/dmtu higher on month.

Also, the price spread between 62.5% Fe grade PB Lumps and 61.5% Fe grade PB Fines at Qingdao port in Shandong had enlarged by Yuan 14/wmt on month to Yuan 114/wmt as of April 11, Mysteel's survey 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.