Hopes of seasonal demand pickup to support iron ore purchases by steel mills

SHANGHAI, Feb 27 (SMM) – Iron ore restocking at steel mills is likely to remain stable this week given the anticipation of a seasonal pick-up in downstream demand in the near term, an SMM survey found. However, lower profits after CNY prevented steel plants from purchasing as high as market expectations. 

Three steelmakers in the east told SMM that they currently have two weeks of raw materials inventories on hand, and will maintain the stock level in the short term. 

As of Wednesday February 27, thinner margins kept steel plants purchase feedstock frequently in small amounts each time. Some mills also turned to alternatives such as lower-grade ore to reduce costs, SMM learned. 

Concern towards the impact of the Vale dam accident in Brazil hiked iron ore price after CNY, and this eroded profits at steel mills. Though iron ore prices moderated in the recent week, net profits remained low at 200-300 yuan/mt, a mill in the east said. 

A steelmaker in the north expected higher steel demand into peak construction season to improve profits in the weeks ahead. 

In the week ended Friday February 22, iron ore deliveries leaving 35 major Chinese ports averaged 2.62 million mt per day, up 197,000 mt from the previous week, reflecting recovering demand, SMM data showed.

As of February 27, prices of seaborne Pilbara Blend (PB) fines at Qingdao port averaged 610 yuan/mt, down some 10% from a high of 680 yuan/mt in the first week after CNY. Concerns over Brazilian supply pulled the prices over 21% higher than pre-CNY, to 680 yuan/mt, SMM assessed.