High-grade iron ore prices track dip in futures; sinter feed premiums rise

Seaborne high-grade iron ore prices erased gains achieved since early March in the week ending Friday March 24, amid a dip in iron ore futures

Iron ore pellet feed premiums continued to edge lower in line with tepid pellet demand in the domestic Chinese market, while sinter-feed cargo prices edged up in line with an increase in demand for imports, sources told Fastmarkets.

Key drivers for the iron-ore market

High inventories and weak demand continued to weigh on seaborne pellet premiums.

A Hong Kong-based trader told Fastmarkets that the weaker performance in downstream steel sales in China had resulted in an across-the-board dip in ferrous-related futures prices, leaving the outlook for quarter two increasingly uncertain.

The trader said that end-user demand for pellet cargoes was, inevitably, affected by weaker steel prices as steelmakers switch to the most cost-efficient options when restocking inventories.

Strong shipments of iron ore lump from Australia in February capped prices in the Chinese portside market.

And despite the uptick in hot metal production through February, and in the first half of March, steelmakers have been hesitant about procuring pellet cargoes and are choosing instead to use more iron ore lump in their blast furnaces, according to a Shanghai-based trader.

A Xiamen-based trader told Fastmarkets that high-grade pellet cargoes will have to be offered at low prices to compete with cheaper domestic alternatives.

The trader said that offers for domestic pellet at the Chinese ports were at a premium of $7-10 per tonne on a 65% Fe basis in the week to Friday.

India-origin 65% Fe iron ore pellet, with an estimated time of arrival in March, was on offer in the seaborne market at the average of the month of the notice of readiness of a 65% Fe index plus a premium of $7 per tonne.

Pellet feed premiums similarly dipped, in line with soft demand for iron ore pellet, with production margins at domestic pelletizers continuing to slip, in line with weak pellet prices in the Chinese market.

“There is a limit as to how much sellers are willing to drop their offers to incentivize buying,” a Singapore-based trader told Fastmarkets.

“Some sellers may be forced to land cargoes to sell onshore if they are unable to make a good deal on the seaborne market,” the trader added.

Pellet sinter-feed premiums have continued to narrow through the first quarter of 2023.

A rebound in consumption of high-Fe sinter fines in line with a ramp-up in hot metal production across Chinese mills has provided some support for sinter-feed concentrates in the seaborne market.

A second trader based in Singapore said that portside demand for Iron Ore Carajas (IOCJ) fines has been steadily increasing since early February.

The trader added that tight shipments of IOCJ cargoes into China could result in an uptick in demand for other high-grade sinter feed in the seaborne market.

Fastmarkets’ weekly iron ore concentrate, pellet prices

66% Fe concentrate, cfr Qingdao: $139.46 per tonne, down $7.53 per tonne
65% Fe blast furnace pellet, cfr Qingdao: $152.12 per tonne, down $9.25 per tonne
Iron ore pellet premium over 65% Fe fines, cfr China: $13.90 per tonne, down $0.10 per tonne

Trades/offers/bids heard in the market:

  • Concentrates
  • No visible activity

Pellets:
Spot market, offer, 60,000 tonnes of BRPL pellets, offered at the April average of a 62% Fe index with VIU adjustment plus a pellet premium of $7.50 per tonne, laycan March 20-30.

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