Chinese steel mills’ lump premiums little changed for Q3

Chinese steel mills have agreed with Rio Tinto and BHP Billiton to set lump-over-fines premiums at $0.101-0.106 per dry tonne unit for the third quarter, little changed from the previous quarter.

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“Individual steel mills in China can settle their premiums at slightly different rates,” a steel mill source in Beijing said.

The premiums mean 62% Fe lumps are priced $6.30-6.60 per tonne higher than fines of the same grade.

“The premium we agreed with Rio Tinto for the third quarter is $0.10 per dry tonne unit, and Rio Tinto said one could have a 10% discount over the premium, if the total iron ore contract volume exceeds 1.6 million tonnes over the year,” a steel mill source in Hebei province said.

“The lump premiums Chinese steel mills got are relatively lower compared with those settled with South Korean and Japanese mills, due to technology setbacks and cheap domestic iron ore and pellet feeds,” the source in Beijing said.

South Korean steel mills agreed on a lump premium of $0.165 per dry tonne unit for the third quarter, little changed from the second quarter, while Japanese steel mills agreed on $0.1725 per dry tonne unit, up 4.5-5% from the previous quarter.

“For coastal steel mills in China, if they have proper technology, they can cut cost by feeding on more lumps for production.

“But for many other steel mills, they either don’t have the technology or it is not viable for them to consume imported lumps due to locations,” the source in Hebei said.

He noted that the steel mill has increased consumption of lumps to 17% of its total iron ore feed.