Entering April, with the end of the heating season in the north, lumps entered the off-season. As lump had poor cost performance amid rising coke prices, the demand from steel mills declined, along with traders' poor purchasing appetite, causing the lump premium to hit a low level. However, lump stocks at ports were low due to declining shipments from Australia affected by weather. The cost performance of lump improved amid low premium, driving demand up. Therefore, the premium of lumps inched upward. Since mid-to-late April, steel mill profits have shrunk as coke and iron ore prices jumped sharply. The output of pellets produced by steel mills increased, dampening demand for imported ones, which caused the premium of pellets to extend declines in April.
Heading into May, coke prices have hiked for four consecutive rounds, and some coking plants have already raised prices for the fifth round. Coke prices have reached a high level, suppressing the demand for lumps. As South China gradually enters the rainy season, lump demand may further drop. However, considering the current low premium, there will be limited downward room. Pellet demand is unlikely to recover amid shrinking profits of steel mills. Although imported pellet stocks at ports are low, it is still difficult for its premium to increase. SMM expects the premium of lumps to rise first and then drop and that of pellets to decline in May.
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