Demand for seaborne iron ore pellet, concentrate continues to weaken

Prices for seaborne iron ore pellet and concentrate largely fell in the week ended Friday August 6, with demand for high-grade ore weakening further, market sources said.

Fastmarkets iron ore indices
Iron ore pellet premium over 65% Fe fines, cfr China: $44.80 per tonne, down $6.90 per tonne.
65% Fe blast furnace pellet, cfr Qingdao: $251.27 per tonne, down $21.45 per tonne.
66% Fe concentrate, cfr Qingdao: $207.66 per tonne, down $20.33 per tonne.

Key drivers
Demand for high-grade iron ore weakened again with less buying interest reported, especially from steel mills in China due to anticipated production cuts over the rest of 2021, market sources said.

Some mills have implemented plans to ensure that total steel production this year does not exceed that of 2020, which means that they are going to have to lower production in the coming months, which will result in less demand for iron ore pellet and concentrate, a mill source in Guangxi said.

Such policy, though not announced nationwide, and the expectation for lower steel production have dominated market discussion of late, resulting in a depressed iron ore market overall. This has led to bearishness in iron ore futures and fines, which has also affected the pellet and concentrate markets, he added.

A trader in Hong Kong said business for iron ore pellet in the seaborne market or at Chinese ports was limited.

A few trading companies could not secure buyers in the seaborne market for their pellet so they had to discharge their cargoes at Chinese ports to sell them in yuan terms. But liquidity at Chinese ports is extremely thin, he added.

Due to the weakening demand, the physical iron ore concentrate market was under considerable pressure, and prices fell heavily as a result, with discounts returning for certain products, a trader in Shanghai said.

A buyer source in northern China said there was still some support shown toward pellet feed concentrate over sinter feed concentrate.

For instance, Minas Rio pellet feed concentrate was still offered at a premium over a 65% Fe fines index, but sinter feed, such as Ukrainian concentrate, had flipped to a discount already, the buyer source added.

Quote of the week
“The demand outlook for both iron ore pellet and concentrate will most likely be weak because steel mills do not need as much high-grade iron ore due to the expected lower steel production despite margins being relatively healthy,” a trader in northern China said.

Trades/offers/bids heard in the market

Pellet
Spot market, 55,000 tonnes of 64% Fe KIOCL pellets, traded at $195 per tonne fob India, end-August loading.

Spot market, 55,000 tonnes of 63.5% Fe low-alumina Indian pellets, offered at $220 cfr China, September arrival.

Spot market, 55,000 tonnes of 62% Fe Ardent pellets, offered at the September average of a 62% Fe index plus a premium of $27 per tonne or at the August average of a 62% Fe index plus a premium of $25 per tonne, early August loading.

Spot market, 55,000 tonnes of 62% Fe Ardent pellets, offered at the August average of a 62% Fe index plus a premium of $22 per tonne, laycan August 1-10.

Concentrate
Spot market, 65% Fe low-sulfur Ukrainian concentrate, offered at the September average of a 65% Fe index plus a discount of $2 per tonne, laycan late August-early September.

Spot market, 80,000 tonnes of 64% Fe SMIS Magnetite Pellet Feed, traded at the September average of a 65% Fe index and its Fe value-in-use, plus a premium of $0.50 per tonne, laycan August 14-23.

Spot market, 66% Fe Minas Rio Blast Furnace Pellet Feed concentrate, offered at the August average Fastmarkets’ index for iron ore 65% Fe Brazil-origin fines, cfr Qingdao, adjusted for Fe content, plus a premium of $2.50-3 per tonne, August arrival.

Alex Theo in Singapore contributed to this report.

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