Spot demand for imported iron ore lump cargoes in Asia has continuing to wane as buyers look for cheaper alternatives.
Platts assessed the spot lump premium at $0.145/dry mt unit Wednesday, down $0.015/dmtu from the last weekly assessment.
The premium is normalized to a CFR basis and expressed over the IODEX fines assessment.
“There is better value for steelmakers to pelletize using domestic concentrate material now, rather than buy imported lump,” a trader in Shanghai said.
“Besides, it is more convenient for them to take delivery of domestic concentrate material rather than have to wait for seaborne lump cargoes to arrive.”
As the weather continues to improve in China, many players said domestic concentrate mining levels should climb as it becomes more conducive to raise production.
Higher seaborne ore prices have also encouraged more domestic producers to resume operations as they can now provide a viable alternative.
Lump and pellet cargoes are mutual substitutes, with the latter processed through pelletization from concentrate material.
A trader said his company was not receiving much interest in lump cargoes from downstream customers and, if the latter were to be enticed into considering lump cargoes, it would have to be at a very competitive level that was much lower than those traded in recent weeks.
“Demand for lump is weaker and there is more than sufficient lump supply in the port stocks market and not many buyers,” a Hong Kong-based procurement source said.
Sources also said that although the fines market was relatively tight at the prompt, steelmakers preferred to seek fines cargoes instead of lump as current lump premium levels still looked too high to them.
However, a steelmaker in eastern China said there was still resilience in demand for lump, given mounting environmental scrutiny from the government.
“Many miners are ramping up their production of fines material while lump output will not increase that much, so that somehow serves to support the lump market,” the steelmaker said.
OFFERS NOT TAKEN UP
Australian miner Rio Tinto was heard to have offered 62%-Fe Pilbara Blend lump at $75.50/dmt CFR China on COREX, according to sources notified by the miner.
The 70,000 mt cargo will load June 26 to July 5.
Utilizing the July IODEX swap assessment of $61.35/dmt CFR North China Tuesday, the PB lump offer yielded a relatively high lump premium of $0.228/dmtu CFR North China.
Sources also said Rio Tinto was offering a cargo of 62.5%-Fe basis Australian PB lump at $0.16/dmtu CFR Qingdao over the July average of the Platts 62% Fe IODEX assessments on globalORE.
The 70,000 mt cargo was offered with a full-month July delivery period, but sources notified by the miner said the actual laycan was June 26 to July 5.
Also on the platform was another offer for 62.5%-Fe basis PB lump at $72/dmt CFR Qingdao.
The 50,000 mt parcel will arrive in July.
The counter-bid for the cargo was $67.50/dmt CFR Qingdao.
Australian producer BHP Billiton was heard to have offered 80,000 mt 63%-Fe Newman Blend lump, co-loaded with 90,000 mt 61.3%-Fe Jimblebar Blend fines to a select group of customers, said sources who received the invitation to bid.
Bids were invited for the NB lump cargo on a cents/dmtu CFR China basis, and for the Jimblebar Blend fines on a cents/dmt CFR China basis, both based over the August average of the Platts 62% Fe IODEX assessments.
Both cargoes will load over August 6-15.
Source: Platts
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