Import iron ore pellets lose their sheen for China mills

30-Oct-2018

The appetite Chinese steelmakers once had for imported iron ore pellet has waned a little due to the high price of the material compared to those of domestic pellet and other imported iron ore fines, market sources have commented. The hefty premium that foreign pellets once enjoyed has slipped from its all-time high, they noted.

As of October 23, Mysteel’s 65% iron ore pellet premium against 62% Australian fines had dipped $10/dmt to $76.5/dmt from the level of $86.5/dmt CFR Qingdao over September 3-24. This had been the commodity’s all-time high since Mysteel began recording the price in December 2013.

“We can feel that trade of imported iron ore pellet has been less active recently, with bidding and offering prices for seaborne cargoes dropping a lot,” an iron ore trader in East China’s Jiangsu province said. “Many steel mills are unwilling to accept such high prices when they can use more pellet made in-house from domestic iron ore concentrates or sintering ore made from imported iron ore fines,” he added.

Mysteel’s port stocks data also indicated this trend indirectly, with pellet inventories at the 45 Chinese ports nationwide regularly monitored by Mysteel increasing for a third successive week over October 12-18, swelling by 39,300 tonnes to 2.3 million tonnes as of October 18.

A Shanghai-based market watcher said that at present, many steel mills in Tangshan in Hebei province have sufficient pellet stocks at their works, because over the past month, the emergency curbs on their pelletizing operations were fewer than those imposed in July and August. Last month during every break in the several rounds of emergency curbs, they had produced as much pellet as possible.

“On the other hand, domestic iron ore concentrate supplies have increased recently, which is also prompting some mills to use more domestic ore to make pellet that is cheaper than imported pellet,” an official with a Hebei-based steelmaker added.

At the same time, some Chinese steel mills are choosing to use more 60%-62% imported iron ore fines such as Rio Tinto’s PB fines during the iron-making process to enjoy more efficient production as well as shave costs compared to imported pellet, according to the market watcher. This too is also squeezing the market for imported pellet.

In the past several months, the price of imported pellet has surged due to the limited supply of domestic pellet while steel mills pursued high production. The premium of 65% iron ore pellet skyrocketed $28.5/dmt from June 1 as of October 23, while 62% Australian iron ore fines price index, by comparison, grew by only $10.35/dmt over the same period, both in terms of CFR Qingdao, according to Mysteel’s price data.

As of October 23, the domestic 62% iron ore pellet price in Hebei’s Qian’an was at Yuan 1,095/dmt ($158/dmt), down Yuan 50/dmt on month. On the contrary, the price of domestic iron ore concentrates in Hebei’s Tangshan nudged up Yuan 5/dmt on month to reach Yuan 765/dmt, both in terms of EXW and including 16% VAT.

Source: MYSTEEL