China steel mills turn to non-mainstream iron ore for cost

Posted on 05 March 2021

In the context of overall strengthening in imported iron ore prices in February, China’s steel mills have turned to lower-grade and generally lower-priced iron ore products for production cost control recently, market sources shared on Wednesday.

As of March 3, Mysteel PORTDEX 62% Australian Fines in Qingdao stood at Yuan 1,195/wmt ($184.8/wmt) FOT and including the 13% VAT, up Yuan 92/wmt from February 1.

“We have noted that some steel mills (in Tangshan) have started consuming more lower-grade iron ore with some not being mainstream supplies with the ferrous content ranging 55-61%, as the prices are more affordable,” a Tangshan-based market watcher commented.

For now, among the non-mainstream products that are gaining popularities among the Chinese steel producers are Atlas Fines and Lumps, and PMI Fines and Lumps, he shared.

On March 3, PMI Lumps at about 60.2% grade was offered at Yuan 1,180/wmt at Lanqiao port in East China. In comparison, PB Fines at 61.5% grade was sold at Yuan 1,180/wmt at Rizhao port on the same day, according to Mysteel’s daily iron ore market tracking.

It has been a rather common practice whenever iron ore prices are high while steel margins are thinning, the Chinese steel mills tend to look for alternatives to control their steelmaking cost, Myteel Global understands.

China’s 91 blast-furnace steel mills under Mysteel’s monthly tracking fell into lossmaking ranging Yuan 32-98/tonne in January for both major long and flat steel products, the situation has improved due to higher domestic steel prices in February, and margins, though in the positive zones, are still relatively low, Mysteel Global noted from some market sources.

A iron ore trader from Shandong in East China confirmed such a trend emerging among the Chinese mills.

“I have noted that SP10 Fines, Royhill Fines and Lumps are getting popular in the spot market, and if the imported iron ore prices persist high in the foreseeable future, Chinese steel mills may further increase the consumption of such supplies,” he added.

On March 3, MB Fines (lower-grade Royhill Fines) at around 59% grade was reported offering at Yuan 1,060/wmt and SP10 Fines with Fe content at around 58.4% at Yuan 1,065/wmt, while Super Special Fines with Fe content at around 57% was offered at Yuan 1,000/wmt, all at Caofeidian port in North China and in terms of FOT and VAT included, while Mysteel tracked.

As for the seaborne iron ore market, the trading of some non-mainstream lower-grade iron ore fines such as 55-57% Indian Fines has also picked up recently on the growing interest among the Chinese steel mills, according to a Shanghai-based iron ore trader.

“Recent high iron ore prices have also encouraged some traders to bet on the future, booking forward cargos,” he said.

As of March 3, Mysteel SEADEX 62% Australian Fines was assessed at $176.7/dmt CFR Qingdao, recording a more substantial rise of $20.3/dmt from February 1.

Source : Mysteel Global