Spot prices for the new mid-grade iron ore fines products had already adjusted accordingly, traders and end users in China told Fastmarkets. With Fastmarkets’ new Iron ore 61% Fe fines, CFR Qingdao index aimed at better tracking and reflecting the spot price of mid-grade sinter fines in the CFR Qingdao spot market, in line with the latest quality of mid-grade fines commonly traded in the market.
The price differentials between major iron ore brands will be in focus, even as China continues to push higher silica and alumina levels in their blast furnaces to cut costs, sources said. This also means that the penalties for contaminants in iron ore will now be judged differently from in the past.
Fastmarkets’ Value-In-Use (VIU) calculations have been further refined. This aids market participants to value silica, alumina and phosphorous more accurately. And is in addition to the magnetite-hematite pellet feed price differential that was launched in 2023.
China’s pivotal role in shaping iron ore pricing trends
China’s appetite is expected to be key in deciphering iron ore pricing trends, major traders and market participants in the CFR China iron ore market told Fastmarkets. This comes against the backdrop of the depletion in Australian ores in the Pilbara region, as well as a shift in global trade flows and demand, and supply balance in response to macroeconomic conditions.
China’s iron ore imports had seen robust growth along with strong crude steel output before Beijing called an end to production growth in 2021, according to Chinese customs data. Ramp-up plans among major miners from Australia and Brazil to cater Chinese mills’ flexibility in importing different ores also became more pronounced.
Industry sources told Fastmarkets that they expect total supply of mid-grade iron ore fines in Australia to remain stable, or increase slightly, after the quality adjusts to around 61% Fe.
There are expectations among market participants that this could be a boon for high-grade iron ore producers, especially as the Australian supply now contain not just lower iron content, but also higher silica and alumina contaminant levels, sources said. But this is not necessarily the case, because steelmaking margins continue to be tempered by factors such as a gloomy macroeconomic climate, changing steel demand patterns and cheap metallurgical coke, which will drive mills’ choice of ores, sources told Fastmarkets.
Impact of global shifts and domestic self-sufficiency in China
Moreover, the lower iron ore prices in China have caused declining shipment volumes from some miners with high production cost, such Indian miners who produce low-grade fines and mid-grade pellet, and other miners from Ukraine, Chile and Swede which supply high-grade pellet and pellet feed, according to trade data compiled by Fastmarkets.
But major miners from Australia and Brazil could still be expected to continue to benefit from their low production costs, given that they are the most cost competitive producers in the world, sources said.
African iron ore supply from the Simandou project is another key factor in focus, given that it is heavily invested in by Chinese organizations and is expected to move large quantities of high-grade supply into China and other parts of the world, though it remains to be seen how soon it can ramp up production amid a projected start date of end 2025, sources told Fastmarkets.
In domestic supply, Chinese steelmakers are now vertically integrated, aided by state-linked trading arms, which help to reduce friction in the sourcing supply chain in both seaborne and portside markets.
China’s domestic concentrates, with government guidance to raise output to 370 million tonnes in 2025, have well replaced most imported high-grade pellet feed and pellets due to their competitive prices, especially for mills in northern China.
With the growing iron ore blending and beneficiation facilities in China’s domestic and portside market, market participants are also watching the country’s drive toward self-sufficiency closely, sources said.
Steelmakers’ shift to economical raw material blends
Chinese steelmakers had also taken steps to adapt to new raw materials trends and strategies, such as adjusting raw material blends and seeking out the economical blends of raw materials to reduce costs, according to sources.
This consumption pattern has led to the dominance of mid-grade iron ore fines in both China’s seaborne and portside market in recent years, given multiple choices of brands with 60-63% Fe.
Meanwhile, Fastmarkets has observed increased trades this year for ores with silica levels as high as 15% from Brazil, and alumina levels as high as 7% from India due to their wide discount over a 62% Fe iron ore fines index.
“Some high-grade iron ore suppliers are blending their products to slightly lower specifications to better align with market demand, this reflects the ongoing challenges in China’s steel sector, where weak downstream demand, particularly from the struggling real estate market, has kept steel margins under pressure,” a Shanghai-based trader said.
In such an environment, mid- and low-grade iron ore has gained significant traction, as steel mills prioritize cost efficiency over premium raw materials, sources told Fastmarkets.
When polled about the quality of major Australia mid-grade iron ore fines, most steel mills said they can adapt to that if price differentials behave accordingly to align with the quality.
“In recent years, most steel mills don’t rely on one specific brand anymore in the sintering process due to weak margins. In fact, with increased capability of beneficiation and blending, mills are more flexible to adjust blends out of cost saving,” a mill source from South China said.
Anticipated pricing changes and future trends in iron ore markets
Over the years of development, seaborne iron ore products trades have shown various types of pricing in primary market sold by miners directly, including single mid-grade or high-grade fixed-price sales, single mid-grade or high-grade floating price sale, mid-grade floating deal using baskets. And in the secondary market, participants typically replicated the pricing methods from the primary market.
In 2024, floating price deals in the secondary market prevailed, while most of deals concluded in primary at fixed prices, according to data collected by Fastmarkets’ steelmaking raw materials editorial team.
Given the launch of Fastmarkets’ 61% Fe iron ore fines index to align with the declined quality of major mid-grade Australia fines, the iron ore industry will go through a period of flux in pricing mechanisms, sources told Fastmarkets.
Some market participants expected that in the short term that most mid-grade iron ore fines might be traded at a fixed price rather than a 62% Fe index-linked price because both sellers and buyers are discovering the price gap between different mid-grade ores.
Looking ahead, the preference for different iron ore types and pricing will continue to depend on market conditions, sources said, adding that the differentials between the various iron ore indices and inter-brand spreads is expected to remain be very dynamic.
When Chinese mills are profiting from each tonne of crude steel they produce, they typically prefer to use high-quality ores to maximize their blast furnace yield and inter-grade price spreads tend to expand during these times, sources said. Conversely, when margins fall away, mills look to cheaper lower-grade iron ore to reduce costs and minimize their production rates.
Want to unpack more iron ore insights? Head over to our hub for iron ore analysis and forecasts.
