As east China will enter the rainy season in May, demand for building materials will fall further. Steel mills are at risk of further losses due to high inventory levels. Therefore, the mills preferred cost efficient products. The discounts offered by FMG in May are basically the same as that in April, meaning no cost advantage to SSF and blend fines.
The price difference between high and medium-grade products is currently lower than 90 yuan/mt. This suggests that the cost efficiency of IOCJ has improved, which will boost IOCJ demand and support its prices. Demand for medium-grade ore, which is the most cost efficient product, will grow further due to the approach of the delivery of the DCE 2305 iron ore contract.
SMM believes that the price spread between high-grade and medium-grade ores will expand marginally, and that between medium-grade and low-grade ores will widen further.
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