SHANGHAI, Jun 18 (SMM) – The price gap between Pilbara Blend and Carajas iron ore fines sees limited room to expand further as supply tightness of the latter is expected to ease in the third quarter.

Chinese steel mills also plan to seek more cost-effective options, SMM learned.

Prices of Brazilian iron ore, including Carajas fines and Brazilian Blend fines, rose significantly in recent months due to tight supply and Chinese demand for low-alumina materials in its pursuit of productivity amid stricter environment requirements and high margins.

As of Friday June 15, the price spread between Carajas fines and PB fines at Qingdao port amounted to 165 yuan/mt, largest since the end of last year. 

However, a source at a north China mill told SMM that it will not raise the proportion of Carajast fines, currently at 4%, and Brazilian Blend fines, at 10%, in its production due to rising premiums of the products. Another mill source in south China also said his company plans to use more of lower-cost PB fines and domestic concentrate in July.

Production at Vale, the world’s largest iron ore exporter, is expected to rebound in the third quarter as its output in the first quarter, at 81.95 million mt, shrank in the rainy season. It declined 12.2% from the fourth quarter of last year, down 4.9% year on year.

Operating rates across Chinese domestic mines dipped in the first quarter, and stood 6% lower year on year as of the end of May.