Posted on 28 Aug 2020
The uptick in iron ore concentrate prices in East China’s Shandong and Anhui provinces is likely to end soon as domestic steel mills grow more reticent about paying high prices for them and are increasing choosing cheaper imported concentrates and pellets instead, market sources said on Wednesday.
Unlike those in other regions nationwide, steelmakers in the two provinces have been more heavily reliant on imported iron ore due to the limited availability of domestic concentrates in that part of China, Mysteel Global understands. Thus, concentrate prices in East China are higher than in other regions.
“Procurement activity among local mills has been relatively low because they thought the prices were high, even though we didn’t pass on the full price increase witnessed for imported iron ore fines last week,” an official with a Shandong-based mining company said.
Domestic miners selling locally produced iron ore usually follow the trend in imported ore prices but in order to gain market share, the miners’ price change is always lower than that for imported feeds, Mysteel Global noted. “In fact, our increase was Yuan 15/dmt ($2.2/dmt) less compared with the hike in imported fines prices,” the Shandong miner explained.
As of last Friday, Mysteel’s PORTDEX 62% Fe Australian Fines index had surged to a new high since April 2013, to reach Yuan 971/wmt FOT Qingdao, higher by Yuan 32/wmt on week, as reported. Beginning this week, the PORTDEX price has softened slightly to reach Yuan 952/wmt on August 25.
By comparison, the offer price for 66% grade concentrates in Shandong’s Zibo rose in tandem by Yuan 40/dmt on week to Yuan 1,115/dmt EXW as of August 21, but as of Tuesday was still at the same level, according to Mysteel’s database. The two prices include 13% VAT.
Moreover, the official also noted that increasingly, local steel mills are seeking out imported concentrates and pellets to partially substitute domestic concentrates, a trend that has further reduced their demand for domestic ores. “If imported iron ore prices continue to soften, we’ll have to adjust our concentrate prices as well, though our stocks remain low,” he observed.
Similar to those in Shandong, some mills in Anhui have gradually moved to buy imported concentrates as well to replace part of their domestic concentrate mix because of the relatively high domestic concentrate prices. Some have even stopped their pelletizing operations by procuring imported pellets directly, a Shanghai-based market insider disclosed, predicting that Anhui concentrate prices are likely to hover at current levels or reverse down.
Prices of imported concentrates and pellets are lower than those of imported iron ore fines at Chinese ports, given the high level of stocks of these feeds at the ports, Mysteel Global noted.
As of August 20, inventories of imported concentrates at China’s 45 major ports were at a near one-year high of 10.4 million tonnes. At the same time stocks of imported pellets at these ports reached 10.7 million tonnes, the second highest since Mysteel started the survey in December 2015, according to Mysteel’s latest weekly survey.
On the other hand, concentrate prices in other regions nationwide, especially in North and Northeast China, are expected to remain high, the Shanghai source said, pointing out that steelmakers continue to prefer to use domestically produced concentrates. Domestic iron ore production in North and Northeast China is higher than in East China, which allows mills in the former regions to enjoy greater pricing leverage because of their multiple options, Mysteel Global noted.
Written by Zhiyao Li, lizy@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com
Source:Mysteel Global
