Premiums of Pellets Stabilise last Week, and Price Difference between High and Medium-Drade Ore Expand

SHANGHAI, Feb 6 (SMM) - Pellet premiums held firm last week, while lump premiums climbed. The ongoing heating season in north China resulted in occasional production restrictions aiming at environmental protection, thus the demand for lump ore was still high. The coke prices were normal after falling for two rounds consecutively. The demand for lump ore was moderate. But on the whole, the lump premiums were lower compared to the same period of previous years. This week, the post-holiday restocking of steel mills and the production resumption of blast furnaces will fuel the demand for iron ore. But the recovery of domestic iron ore concentrate production is slow, and the cost advantage of domestic pellets is less prominent. In this context, the demand for lumps may trend higher. It is forecast that both pellet premiums and lump premiums will tick up this week.

The price gap between high and medium-grade ore widened last week, while that between medium and low-grade ore was flat. Taking Qingdao port as an example, the local price difference between mainstream high-grade ore (IOCJ fines) and medium-grade ore (PB fines) expanded 12 yuan/mt to 110 yuan/mt, while that between PB fines and low-grade ore (super special fines or SSF) were stable at 130 yuan/mt. Affected by the torrential rain in Brazil, the shipments of Vale decreased, leading to low port arrivals of IOCJ fines and low port inventory. Meanwhile, the domestic output also diminished during the winter break. The low supply of concentrates bolstered the prices IOCJ fines, allowing the price gap between high and medium-grade ore to expand. With regard to this week, the concentrate output will rise with domestic mines and dressing plants reopening. The demand for imported IOCJ fines may thus shrink. Recently, the spot-futures price spread inflated on the import loss of iron ore. The speculative trading of PB fines increased, which offered support for its prices. It is forecast that the price gap between high and medium-grade ore will narrow, while that between medium and low-grade ore may expand.