SHANGHAI, Nov 1 (SMM) – After months of strong performance, Pilbara Blend (PB) fines are likely to face downward pressure amid signs of improving spot trades of lower-grade iron ore at ports, SMM expects.
Steel mills tend to adjust the proportion of iron ore in blast furnaces by using more lower-grade resources. This is set to impact higher-grade materials, especially PB fines that outperformed its medium- and high-grade counterparts from June.
As of Wednesday October 31, the spread between PB fines and Jimblebar Blended Fines stood at 80 yuan/wmt, the widest in the past year; spread between PB fines and Super Special Fines (SSF) came in at 215 yuan/wmt, wider than the previous week. Grades of Jimblebar Blended Fines and SSF are lower than that of PB fines.
Emission cuts continue to frustrate Chinese steelmakers this year, as the central government intensifies anti-smog initiatives. To chase profit margins, steelmakers have to switch to higher grade iron ore to maintain output.
Winter production curbs will begin from November 1 in Handan, a major steel producing city in Hebei province. SMM calculations showed that this would impact pig iron capacity by 21.17 million mt during the first session from November 1 to December 31, which equates to some 41% of overall capacity across 18 major steel mills across the region.
Curbs during the first session are estimated to reduce demand for iron ore by over 33 million mt and this is set to weigh on prices of iron ore.
