Lump ratio in Chinese blast furnaces rises to one-year high

• Lower coke prices make lumps more cost-effective
  
  
• But improved demand fails to boost lumps prices
  
  

Mysteel Global: Mysteel's regular tracking of 114 Chinese steel mills indicated that they had used more lumps in their melts lately, with the portion of this iron-making material added into their blast furnaces (BFs) rising to a one-year high of 10.97% on average over 7-13 November. This marks an increase of some 1 percentage point compared with the intra-year low of 9.95% recorded about two months earlier.

The increase in lump usage in BFs is the result of robust hot metal output from integrated steelmakers and reduced costs on metallurgical coke purchases, a Shanghai-based market watcher suggested.

Generally, higher lump feeds into BFs mean higher consumption of met coke than ore feeds such as sintered iron ore and pellets. "The recent declines in Chinese coke prices have made lumps more cost-effective when compared to other iron ore feeds, so steel mills are willing to increase the lump usage," the market watcher said.

Since late October, leading steel mills in North and East China have succeeded in cutting their coke procurement prices by a total of RMB 150-165/tonne ($20.7-22.8/t) in three bouts, with the latest one just taking effect on Monday.

As a result, China's coke prices have started a downward trajectory since late last month, with the national composite coke price assessed by Mysteel falling by RMB 129.8/t m-o-m to RMB 1,702.8/t, including 13% VAT, on 18 November.

Domestic steel mills' rising appetite for lumps was also reflected in the recent declines observed in stocks of the feed ore at China's major ports. Specifically, inventories of imported lumps stockpiled at the 45 major Chinese ports shrank for two straight weeks to 21.4 million tonnes (mnt) by November 14, down by 1.2% w-o-w, according to Mysteel's tracking.

Nonetheless, improved demand for lumps provided little boost to its prices. Mysteel's 62.5% Fe iron ore lump premium against 62% Fe Australian fines actually dropped steadily to a two-month low of $0.1295/dry metric tonne unit (dmtu) on 18 November, $0.009/dmtu lower m-o-m.

Market sources explained that despite the improved cost performance of lumps, low-priced fines remained the most preferred iron ore products among steelmakers, as mills intended to control their production costs amid shrinking steel margins.

Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.