Posted on 15 Apr 2022
Blast furnace steelmakers across China grappling with thin margins on their finished steel continue to prefer lower Fe grade imported iron ore products, according to market sources on Thursday, a fondness that is seeing prices of these ore products firm compared with those of other ores.
"We're seeing that currently, many steelmakers are still consuming large quantities of lower Fe grade iron ore, as the relatively cheap direct prices of these grades can help them save money in their battle against consistently thin steel margins," a Shanghai-based iron ore trader remarked.
The trader also noted that correspondingly in the spot market recently, lower Fe grade iron ore products including Super Special Fines (SSF), Jimblebar Fines, SP 10 Fines and SP10 lumps have seen active buying from steelmakers as well as traders.
By April 13, the prices of 56.5% Fe SSF and 61.5% Fe PB Fines at Shandong's Qingdao port, as assessed by Mysteel, stood at Yuan 720/wmt ($113/dmt) and Yuan 980/wmt respectively, both on CFR basis and including 13% VAT.
According to Mysteel's latest survey, 91 Chinese blast-furnace steel mills sampled regularly by Mysteel had their margins on selling rebars become negative in March, with the average gross loss among the surveyed makers reaching Yuan 94/tonne ($14.8/t) - lower by Yuan 113/t on month.
A Zhejiang-based iron ore trader in East China also mentioned that the feeble level of profit that many mills are enduring now was the major reason behind the firm demand for lower Fe grade products. "Steelmakers will consider their overall raw materials cost, and lower grade ores are still their priority choice, even though coke prices have rallied higher," he said.
Under Mysteel's assessment, China's national composite coke price had climbed to a five-month high of Yuan 3,805.2/t including the VAT as of April 13.
He also pointed out that going forward, the margins the steelmakers enjoy will still be the deciding factor for whether the mills maintain or alter their consumption preference for different iron ore products.
Boosted by the firm demand from steelmakers, the prices of lower Fe grade iron ores have performed more strongly compared to other iron ore products, Mysteel Global observed.
As of Mysteel's April 13 assessment, the spread between 56.5% Fe SSF and 61.5% Fe PB Fines at Qingdao port, for example, had narrowed further to Yuan 260/wmt – a low since last mid-December – from Yuan 278/wmt a week earlier.
Source:Mysteel Global
