WRAP-UP: Ten major news in China 20...

The rather eventful 2019 for China’s iron ore market is approaching its end, and in retrospect, this year has been full of surprises both in demand and supply as well as in prices for the market participants. Mysteel Global has listed the ten major happenings in the market according to our own understanding.

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8. China’s steelworks loaded light of iron ore on high prices and frequent curbs

For most of 2019, most of Chinese steel mills have adopted the tactic of keeping light iron ores stocks in-house so as to better manage raw materials costs because of the ever-rising iron ore prices especially in the first half of 2019.

Moreover, frequent curbing from local authorities in various names on steel mills’ sintering and blast furnaces throughout the year especially in the key steelmaking provinces such as Tangshan, North China’s Hebei province, has made more sense for the local steel mills to be light loaded with steelmaking raw materials especially the rather expensive iron ore to have more flexibility in iron ore feeds into blast furnaces.

In 2019, for example, Mysteel’s survey on 64 steel mills showed that their imported iron ore sintering fines stocks ranged between 14.51-19.95 million tonnes compared with the range between 15-22.1 million tonnes in 2018.

Figure 3: Mysteel’s survey among 64 steelmakers across China, Source: Mysteel’s bi-weekly survey

9. Cost-consciousness promoted lower-grade iron ore among Chinese steel mills

Lower-grade iron ore has been with growing popularity among Chinese steel mills since around February-March when the seaborne iron ore price and then the Yuan-price iron ore soared, as the steel producers, squeezed by the rising iron ore price and decreasing steel margins have resorted to the best combination of iron ore by mixing lower-grade imported iron ore with domestically-produced concentrates for the cost effectiveness and efficiency.

The peak of lower-grade iron ore popularity was reached in July and FMG, a core lower-grade iron ore supplier to China with the ferrous content ranging 56-61%, has benefited greatly from the change of procurement strategy among the Chinese steel mills, and it has been able to gradually reduced its discounts on its products month by month.

FMG’s discount for its 56.5% Super Special Fines (SSF) was only about 6% against the 62% Australian fines pricing index for August sales from the 37% discount in January and the discount for its 58.2% FMG Blend Fines was as low as 4% against the 28% discount in January.

FMG, however, has enlarged its discounts again since September with the growing supplies of higher-grade iron ore and lower iron ore prices, though the discounts were still not as deep as a year ago, and SSF, for example, the discount for December sales is at 15% against the 40% discount for December 2018 sales.

10. China’s domestic iron ore output grew 7%

Amid the price surges in both seaborne and the domestic iron ore prices most of the time for 2019 and higher margins, China’s domestic iron ore output both in raw ore and concentrates, and over January-November, China’s domestic iron ore concentrates output among the 332 mining companies grew 7% or about 16 million tonnes on year to about 224 million tonnes, according to Mysteel’s own survey.

The country’s run-of-mine iron ore output grew at a similar pace of 6.3% on year to about 786 million tonnes over January-November, and the large- and medium-sized miners posted an eye-widening 365% year-on-year growth to Yuan 12.8 billion over the first ten months, according to the statistics from the Metallurgical Mines’ Association of China.

Figure 4: Mysteel’s survey on 126 Chinese iron ore miners’ operation, Source: Mysteel’s bi-weekly survey

The growth in domestic iron ore also benefited from the Chinese steel mills’ growing appetite for domestic supplies amid global supply hiccups and the need to mix higher-grade domestic iron ore with lower-graded imported cargoes.

Figure 5: Daily domestic sintering concentrates use among 64 Chinese steel mills, Source: Mysteel’s bi-weekly survey

Written by Victoria Zou, zyongjia@mysteel.com, Fangwei Lin, linfangwei@mysteel.com and Zhiyao Li, lizy@mysteel.com
Edited by Hongmei Li, li.hongmei@mysteel.com

WRAP-UP: Ten major news in China 2019 iron ore market - 3