Pellet Premiums Drop Last Week, and the Spread Between Medium and Low-Grade Ores Expands Greatly

SHANGHAI, Apr 24 (SMM) - Last week, the pellet premiums fell, while the lump premiums stabilised. The steel mills were less willing to produce under the pressure of higher finished steel inventories. Some mills reduced their pig iron output, thus the demand for high-grade iron ore decreased, driving down the pellet premiums. However, steel mills' demand for lump grew amid the third round of coke price cuts.

The overall iron ore demand will decrease this week since some steel mills will carry out maintenance. And steel consumption has also weakened in the off-season. The loss-making steel mills cannot afford high-priced iron ore concentrates, further dragging down the premiums of pellets and lumps.

Last week, the spread between high and medium-grade imported iron ores narrowed, but that between medium and low-grade ores expanded. Taking Qingdao Port as an example, the price difference between mainstream high-grade ore (IOCJ) and medium-grade ore (PBF) narrowed by 4 yuan/mt to 95 yuan/mt from a week ago, while that between mainstream PBF and low-grade ore (SSF) expanded by 29 yuan/mt to 140 yuan/mt. IOCJ prices slumped on slack demand from steel mills as a result of low profit margins. Prices of some mainstream medium-grade ores remained firm due to the high costs, while the prices of low-grade ores dropped greatly on the high inventory. As a result, the price difference between the medium and low-grade ores expanded sharply. Steel mills suffering high finished product inventory pressure and huge losses will prefer low-grade iron ores in order to cut costs. It is expected that the price difference between high and medium-grade iron ores will expand this week, while that between medium and low-grade ores will narrow.