Posted on 29 Jun 2022
The determination of Chinese steelmakers to aggressively cut their production costs is resulting in lower consumption of medium- to higher Fe grade iron ore lumps such as PB Lumps and Newman Lumps, with the mills' active avoidance of these grades causing prices of related iron ore products to tumble recently, according to market sources on Tuesday.
"The trend is that iron ore lump products are less affordable to many steelmakers to some extent, especially when those mills' finished steel margins are being heavily squeezed to the point of them losing money," an iron ore trader in East China's Shandong province commented. "So, it is no surprise to see lump demand among steel mills decline," he added.
Normally, healthy margins available on finished steel will encourage steelmakers to consume more medium- to higher Fe grade iron ore lumps and so lift their overall steel production. But currently, some steelmakers are actually trimming their production to minimize the losses they're incurring, Mysteel Global observed.
The findings of Mysteel's latest survey among 114 Chinese steel mills bears this out, with the lump portion in their blast furnace melts declining to 10.23% on average as of June 22, the lowest since early October 2021.
Considering the sluggish demand from steelmakers now and going forward, the trader said he had no plans to trade iron ore lumps in the near future too.
Little wonder then that prices of iron ore lumps are rather weak. As of June 27, Mysteel's 62.5% Fe iron ore lump premium against 62% Fe Australian fines stood at $0.094/dmtu, plunging by 38% on week and the lowest since late September 2021.
Also as of Monday, the price of 62.5% PB Lump at Qingdao port had dropped to Yuan 1,009/wmt ($150.8/wmt), down Yuan 61/wmt on week, while the price of 61.5% PB Fines at the same port climbed by Yuan 13/wmt on week to Yuan 831/wmt, both FOT and including 13% VAT and according to Mysteel's assessments.
Source:Mysteel Global
