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China’s iron ore miners raise offers over Yuan 1,000/t

Offering prices of domestically-produced iron ore concentrates from miners and beneficiation plants in East China’s Shandong and Anhui provinces have broken through the psychological ceiling of Yuan 1,000/tonne ($144/t)), following closely behind the ever-surging imported iron ore prices, and some Chinese steel mills have reportedly agreed to pay more, industry sources confirmed on Thursday.

On August 13, the offering prices in Shandong’s Linyi and Anhui’s Fanchang have both surpassed the Yuan 1,000/t, though Hebei, the largest ore producing and consumption base ore-in North China is still a step away for the three digits partly due to more supply sources and fiercer competition among local sellers, Mysteel Global noted. 

Offer prices of concentrates in Linyi, Fanchang and Tangshan on Aug 13

Location

Grade

Price (Yuan/dmt)

Chg from Jul 28

M-o-M

Y-o-Y

Pricing terms

Linyi

65%

1,075

3.9%

7.5%

18.1%

EXW and including 13% VAT

Fanchang

65%

1,000

0

5.3%

16.3%

Tangshan

66%

985

3.1%

8.5%

15.2%

Sources: Mysteel

The recent strengthening in the imported iron ore and domestic concentrates prices, other than their general resilience of the fundamentals, has had great to do with rebound in China’s domestic steel prices and the overall growing optimism on China’s domestic steel consumption starting August, Mysteel Global noted.

China’s hot-rolled coil (HRC) price, which is rather stable with sales more on long-term deals, surged too in the latest round of domestic steel price rises, and that of the Q235 4.75mm HRC rose to Yuan 3,984/t and including the VAT, up 1.9% from July 28, up 2.7% on month and 5.3% higher on year, according to Mysteel’s assessment.

It also exceeded that of the HRB 400 20mm dia rebar price starting June 23 after having tailing behind the long steel price since May 21, Mysteel’s data showed.

Higher steel prices and remaining positive steel margins despite iron ore price surges have, therefore, have made relatively easier for the Chinese steel mills to agree on higher domestic iron ore price, especially those in Shandong and Anhui that have been more heavily relying on imported iron ore with limited availability of the domestically-produced iron ore regionally.

Despite the rises in domestic iron ore, they are still with pricing competitiveness and cost cost effectiveness against the imported cargoes, an official from a Shandong-based mining company shared, disclosing that he has successfully convinced his local mill customers to agree on higher concentrates prices several times since mid-July, when imported ore prices has started the uptrend.

Mysteel’s SEADEX 62% Fe Australian Fines index had climbed back to above $100/dmt CFR Qingdao since July 3 and has been loitering at this level since then, touching the 13-month high of $122/dmt CFR Qingdao on August 12.

Besides, Chinese iron ore miners are with greater bargaining power as concentrates supplies from the Chinese miners and beneficiation plants have been comparatively tight since sometime last year, as demand has picked up faster with the ever-soaring imported iron ore prices, and the  newly-commissioned independent pelletizing plants in 2020 have been actively sourcing concentrates mainly from the domestic market, market sources shared.

As for the concentrates offering price in Tangshan, some market sources anticipated that it would be just a matter of time for the prices to reach the four-digit level should the iron ore market fundamentals remain largely as now.  

“Tangshan’s steel mills are highly likely to agree to pay over Yuan 1,000/dmt for local concentrates in the future, as the imported cargoes of comparable qualities such as Carajas Fines are much more expensive,” an official from a local steel mill admitted.

Vale’s Carajas fines with 65% Fe content was sold at Yuan 975/wmt FOT at the Caofeidian port of Tangshan on August 12, or equivalent to Yuan 1,083/dmt, according to Mysteel’s assessment.

The Tangshan mill official noted that the four digits have emerged in the offering prices in Handan and Xingtai that are neighbouring Tangshan, which may encourage Tangshan miners and beneficiation plants to do the same.

A procurement official from a second mill in Tangshan confirmed hearing offering prices of domestically-produced concentrates at Yuan 1,010/dmt recently.

Nevertheless, “the final price will be negotiated between the steel mills and suppliers in Tangshan, and many times the local mills have greater pricing leverage because of their multiple options,” the first Tangshan official pointed out.

It was in March 2014 that the domestically-produced iron ore concentrates were offered at over Yuan 1,000/dmt in Tangshan, according to Mysteel’s data.

Written by Zhiyao Li, lizy@mysteel.com, and Hongmei Li, li.hongmei@mysteel.com

Edited by Russ McCulloch, russ.mcculloch@mysteel.com