[SMM Iron Ore] Higher lump premiums and Brazilian freight push imported iron ore margins negative

The average imported iron ore margin fell from 1.82 yuan/mt to -0.73 yuan/mt this period, driven by higher lump premiums and rising Brazilian freight rates.

Iron ore demand continues to decline. As of 23 September, the blast furnace operating rate across 242 mills tracked by SMM stood at 88.76%, down 0.17 percentage point week on week. Average daily hot metal output at sample mills fell 4,800 mt to 2.3943 million mt. Deeper mill losses have reduced the incentive to produce and hot metal output continues to fall. SMM tracking shows more mills scheduling maintenance, and the decline in hot metal output may become more pronounced from October, reinforcing expectations of contracting demand.

Fundamentals remain bearish, though futures firmed slightly on market talk of reduced Brazilian shipments. With pre-holiday restocking complete and arrivals rising, prices are likely to come under pressure and stay soft within a range. Imported margins are likely to track spot lower.