SHANGHAI, Nov 29 (SMM) – Lower-grade iron ore across Chinese markets have seen their price spreads with high-quality materials sharply narrowed in recent weeks as the slumps in steel prices shrank profit margins across steelmakers and prompted them to use lower-quality iron ore in order to cut costs.
As of Wednesday November 28, makers of rebar, used in construction, could see margins of 327 yuan/mt with iron ore of $74/mt, down 68% from a month ago and 943 yuan/mt from the peak of 2018, SMM assessments showed.
In the past month, producers of hot-rolled coil (HRC) saw a larger loss of 71% in their margins, at 211 yuan/mt as of November 28, down 1,187 yuan/mt from 2018’s peak.
Recent steep declines in iron ore helped slightly rebound the margins and this deterred some steel mills from changing the type of iron ore they use. Some mills chose to take a wait-and-watch stance for now.
As of November 28, the price spreads at Qingdao port between Carajas fines (Fe 65.61%) and Super Special fines (Fe 56.49%) stood at 340 yuan/mt, 46 yuan/mt narrower than the level recorded on October 31, SMM assessments showed.
One mill in east China told SMM that it has stopped purchasing high-quality iron ore due to sharply narrowed margins and that it used more super low-grade materials.