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Import interest for high-grade iron ore, including high-grade sintering feed, pellet and pellet feed, in the seaborne market largely correlated with steelmaking margins for most of 2024, and market participants are expecting a similar trend in the year ahead.
A Shanxi-based steelmaker said demand for high-grade fines is expected to be weak in the first quarter of this year, in line with poor steelmaking margins.
“As long as the perennial issue of overcapacity and oversupply remains unresolved amid a sluggish recovery of the construction sector, any upside in domestic steel prices is likely to remain capped,” a trader in Beijing said.
The same source added that “A constrained profit margin is expected to hamper the procurement ability of Chinese mills over premium-grade sinter ore.”
Market participants have noted that, due to the narrow discount for low-grade fines, it is not cost-effective to blend low-grade and high-grade fines in the sintering process when compared with using mid-grade iron ore fines.
“The demand for high-grade fines is unlikely to increase unless the discount for low-grade fines widens, making the high-grade and low-grade blend more cost-effective,” a Shandong-based steelmaker said.
Market participants believe the high-grade iron ore fines market will remain under pressure this year with sufficient supply.
The port inventory for high-grade iron ore fines remains high at the Chinese portside market, which limits the price difference between high-grade and mid-grade fines, sources said.
A Shanghai-based trader said that Brazil’s rainy season is unlikely to affect high-grade iron ore supply in the first quarter of the year because it primarily affects the southern and southeastern regions, with minimal impact on the northern region, where high-grade iron ore Carajas fines are produced.
A second Shanghai-based trader said a new high-grade iron ore supply from the Simandou project is expected to mine the first cargo by the end of 2025, noting that more high-grade supply is expected to further suppress high-grade iron ore price premiums.
Other market participants remain cautious, holding reservations about the high-grade supply outlook.
“The output volume from the Simandou project is expected to be small, and whether its quality could replace current high-grade iron ore fines remains uncertain,” a Zhejiang-based trader said.
In 2024, demand for imported high-grade pellet and pellet feed was mostly capped by weak steelmaking margins in China and a robust supply structure, which is similar to the high-grade sintering fines.
Sources told Fastmarkets that this pattern is likely to continue in 2025, along with the lack of seasonal sintering production cuts in North China from November to March, which usually should have supported the demand for direct-charge ore in blast furnaces.
A few market participants said that in the short term there is no strong driver to support a sharp rebound for high-grade pellet feed and pellet premiums due to the uncertainty of China’s downstream steel consumption in 2025 at home and aboard, while there is lack of expectation for supply disruption or reduction from major overseas miners, along with China’s aim to further raise domestic iron ore concentrates output in the coming year.
“The high-grade supply in other regions is unaffected by the rainy season like Brazil did, such as concentrate and pellet feed supply from Australia, Ukraine, Peru and Canada in the first quarter,” a Hunan-based steelmaker said.
Exports from Ukraine resumed from 2024, after the shipment disruption from around March 2022, and most of its concentrates were shipped to China with a discount to the Fastmarkets 65% Fe iron ore fines index. Only a few high-grade Ukraine pellet deals were concluded in China’s seaborne market, because most Chinese mills cannot afford the high pellet premium given their low steelmaking margins and lower-grade substitutes from India.
From January to November 2024, China imported about 139 million tonnes of iron ore concentrates, up by 15.35 million tonnes or 12% from the same period of 2023. The top suppliers were from Australia, Brazil, Peru, Canada and Ukraine, according to the latest data from Chinese customs.
At the same time, iron ore pellet import volume reached 21.79 million tonnes over January-November 2024, up by 0.34 million tonnes or 1.6% year on year, with top import volumes from India, Iran and Oman.
But some market participants said the domestic concentrates output in 2024 was impacted by frequent safety checks, which might continue into 2025, despite the country’s target to produce about 370 million tonnes of concentrates by the end of the year, 100 million tonnes higher than 2020 levels.
The relatively healthy imports have led to a lower premium for major high-grade pellet feed and pellet premiums over the Fastmarkets 65% Fe iron ore fines index through 2024, as well as accelerating the stock level at major Chinese ports, sources told Fastmarkts.
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