SHANGHAI, Aug 29 (SMM) – As supplies of high-grade materials grew and demand weakened, the price spreads between high- and low-grade iron ore at Chinese major ports narrowed from the middle of August, SMM believed.

As of Tuesday Aug 28, the price spread between Carajas fines and Pilbara Blend fines at Qingdao port came in at 249 yuan/mt. It dipped by 8 yuan/mt from 257 yuan/mt August 17.

Seaborne arrivals at major Chinese ports have risen for three consecutive weeks and this grew supplies of high-grade materials.

Inventories of Carajas fines at Jingtang port as of Tuesday jumped over 86% from the middle of August. Port stocks of Australian materials including Mac fines, Newman fines and Pilbara Blend fines (MNP) also rebounded over the past fortnight and approached levels in the middle of August.

Blast furnaces across mills in Xuzhou, Tangshan, Changzhou, Wuan, Pingxiang and Xingtai were required to cut their capacities, and this eroded the demand for iron ore.

Growing supplies and shrinking demand weighed on the prices of high-grade materials. As the market declined, low-grade materials were less susceptible to price changes than their high-grade counterparts and this helped narrow the price spreads between them.

Prices of low-grade materials did not gain as much as prices of high-grade materials as mills preferred high-grade materials to chase high profits.

In light of extended production cuts, SMM expects price spreads to continue to narrow. It was heard that Anyang and Tangshan would begin winter production cuts in September. That same month, the central government may start its next round of environmental reviews across Anhui, Hunan, Sichuan, Guizhou and Shandong provinces.