Increased availability of cheaper substitutes to seaborne iron ore lump material continued to weigh on the market Wednesday, as spot lump premium assessments fell for a second week.
Platts assessed the spot lump premium at $0.16/dry mt unit, down $0.02/dmtu from the last weekly assessment. The premium is normalized to a CFR basis and expressed over the IODEX fines assessment.
Domestic concentrate material in China appeared to be resurging, giving steelmakers increased options to meet production requirements at more competitive levels than imported lump cargoes.
"Right now mills are trying to buy more domestic concentrate material to pelletize, as it is cheaper to do that than buy imported lump," a trader based in Zhejiang said.
Domestic concentrate production volumes had since risen because of warmer weather in China, he said, making it more conducive to mine.
Lump and pellet cargoes are mutual substitutes, with the latter processed through pelletization from concentrate material.
"The market for fines is pretty strong at this point but lump, on the other hand, is a bit of an outlier," a Singapore-based trader said.
Sources said they were more comfortable bidding at around $0.15/dmtu CFR North China for spot lump shipments.
A Shanghai-based trader said it was difficult to sell lump cargoes now, but producers were not lowering offer levels, resulting in a wide spread between bids and offers.
Port stock lump premiums in China were trading at the $0.13/dmtu level, he said, and market participants said seaborne lump premiums would soon follow suit and soften further.
"It seems like lump demand is still alright for now for more prompt-arrival cargoes, as is the same for fines," a Hebei-based steelmaker said.
"There are people seeking lump cargoes at Chinese ports too, but perhaps they are not willing up pay up at the high offer levels. So, it appears they are holding back for now."
Meanwhile, Australian miner Rio Tinto offered 62%-Fe Pilbara Blend lump through a spot tender Wednesday, according to sources who had been invited to participate in the bidding.
The miner was seeking a lump premium over the June average of the Platts IODEX assessments. The 70,000 mt cargo will load June 23 to July 2.
At the 5.30 pm Singapore time (0930 GMT) assessment timestamp, the tender was heard to have not been awarded.
A cargo of 62.5%-Fe basis Australian Newman Blend lump was heard to have been offered at $73/dmt CFR Qingdao on globalORE, for an 110,000 mt shipment arriving July. It was initially offered at $74/dmt CFR Qingdao before it was lowered.
Placing the offer above the July IODEX swap assessed at $58.75/dmt CFR North China yielded a lump premium of $0.22/dmtu CFR North China.
Elsewhere, a Beijing-based trader heard of an offer for 90,000 mt 61%-Fe Australian Pilbara Blend fines, co-loaded with 80,000 mt of 62%-Fe PB lump.
The PB fines cargo was offered at a premium of $1.50/dmt CFR China over the July average of IODEX assessments, while the lump portion was offered at $0.80/dmt over the July average of Platts lump assessments. Both cargoes will load in July.
Source: Platts
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