Limited demand continues to pull high-grade iron ore prices down

Key drivers

Demand for high-grade iron ore remained limited, with most mills still focused on consuming low- to mid-grade iron ore fines to manage production costs, market sources told Fastmarkets.

“Currently, several mills are either voluntarily cutting steel production or placing blast furnace units on maintenance because steel margins have narrowed a fair bit,” a northern China mill source said.

The source added that some mills have been facing tight margins since April and have adopted cost-saving strategies, such as restructuring manpower headcounts, to lower operations costs.

Shipments of both iron ore concentrate and pellet into China have been very limited. At the Chinese ports, inventory for both high-grade iron ore products has been building, indicating poor demand, a Hong Kong-based trader said.

“Domestic Chinese demand for higher-grade iron ore has been under pressure from falling steel prices. This is reflected in rising inventory levels of incoming cargoes of iron ore concentrate, as well as iron ore pellet,” a mill source in southern China told Fastmarkets.

Mills operating with negative margins are unlikely to consider procuring more cargoes. Some have implemented a suspension of further raw material procurement until prices in the iron ore market stabilize, the same source added.

A Beijing-based mill source told Fastmarkets that while premiums for iron ore concentrates have been significantly lower in recent weeks, importers are not likely to seek further cargoes in the absence of domestic demand.

“Seaborne activity for iron ore pellet has been largely muted. Both buyers and sellers have refused to absorb the 50% tariff imposed on cargoes exported out of India,” a Singapore-based trader said.

High-grade iron ore pellet from Ukraine is unlikely to be shipped to China because suppliers like Ferrexpo still encounter difficulties moving cargoes from its ports along the Black Sea. This is largely due to limited logistics caused by Russia’s invasion of Ukraine, the Singapore-based trader added.

Fastmarkets iron ore indices

66% Fe concentrate, cfr Qingdao: $123.12 per tonne, down $13.84 per tonne

65% Fe blast furnace pellet, cfr Qingdao: $146.84 per tonne, down $10.01 per tonne

Iron ore pellet premium over 65% Fe fines, cfr China: $29.30 per tonne, down $1.70 per tonne

Trades/offers/bids heard in the market

Concentrate
No visible activity.

Pellet
No visible activity.

Norman Fong and Paul Lim in Singapore contributed to this report.