The Premiums Of Pellets Dropped Last Week, While Those Of Lumps Rose

SHANGHAI, Oct 19(SMM) – The premiums of pellets dropped slightly last week, while those of lumps rose continuously. Affected by the decline in demand, iron ore prices saw an overall price decline, and the pellet premiums fell accordingly. However, since steel mills in the Tangshan area of Hebei Province implemented production restriction on sintering machine, and the heating season is about to enter, lump demand may run at its peak, supporting the continued rise of lump premiums to reach a high. Looking at this week, the recent air quality in the north China was acceptable, but the risk of tightening enforcement of environmental-protection production restrictions increased amid the convening of important meetings in Beijing. At the same time, considering the high price of domestic iron ore concentrate and the profit loss of pellet mills, supply is hard to see increment. Inventories of pellets and lumps at ports remained low. It is expected that the pellet and lump premiums will rise this week.

The price spread between high and medium-grade imported iron ores remained stable last week, while that between medium and low-grade ore expanded slightly. Taking Qingdao port as an example, the price difference between mainstream high-grade ore (IOCJ fines) and medium-grade ore (PB fines) was 84 yuan/mt last week, flat with two weeks ago, while that between PB fines and low-grade ore (super special fines or SSF) expanded 1 yuan/mt to 94 yuan/mt. Iron ore spot prices fell overall last week. However, changes of port resources or downstream demand in the mainstream varieties of high, middle and low-grade ore were all not large. In order to reduce costs, steel mills increased their demand for non-mainstream low-grade ore resources. Looking ahead, iron ore prices may still decline this week. As steel mills’ losses may continue to increase, demand for low-grade ore will be promoted. At present, high and medium grade resources were tight and traders refrained from selling in hopes of higher price, so the price differences is hard to expand. As such, SMM expects that the price difference between high and medium-grade ore will remain stable, while that between medium and low-grade ore will shrink slightly this week.