Premiums of lump and pellet extended declines

Premiums of pellets and lumps both fell further last week. Weaker demand for iron ore resulting from continuously falling pig iron output dragged down premiums of lumps and pellets further last week. This week, there is still room for domestic iron ore demand to decline. This, coupled with an increase in overseas supply, will continue to lower iron ore prices.

As coke prices are estimated to still have room for a decline of 200 yuan/mt, some steel mills are expected to maintain or increase the use of lump, bolstering lump premiums. Demand for imported pellets is unlikely to increase due to improved cost efficiency of domestic pellet. SMM expects that the premiums of lump and pellet will continue to fall. But the decline in lump premiums will be less than that in pellet premiums.

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