Seaborne iron ore lump premiums firmed Wednesday as demand appeared to be picking up on the back of stronger pollution regulations pushing Chinese mills to turn to higher quality raw material.
Platts assessed the weekly spot lump premium at $0.115/dry mt unit, up $0.015/dmtu week on week, the third straight week that it has strengthened following a period of prolonged softness.
With added pressure from the Chinese government to cut emissions levels in order to ease the country's pollution problems, more mills are looking at having to purchase higher quality ores in order to comply.
This is helping to support demand for lump material, especially when the process of sintering fines is the most polluting in the steelmaking process.
Additionally, with Beijing hosting a national parade in September, sources said there would be stricter requirements over air quality control and mills would come under even more pressure if they didn't meet standards.
The same situation occurred last year when Beijing hosted APEC meetings and mandated many mills to idle production in an attempt to reduce smog in the capital.
Two Chinese steelmakers said that, in anticipation of stronger buying interest from end-users, several international traders had approached mainstream producers for full Capesize vessels of lump material.
This was in sharp contrast to the situation just a few weeks ago when even a co-loaded half-Cape cargo of lump would affect the ability of sellers to offload the fines portion of the combined shipment because there was such poor demand for lump.
"Lump demand is stronger. There is more buying and trades are also firmer," a Singapore-based source at an international trading house said.
Lump trades also saw gains this week, with buying interest significantly higher than last week.
Australian miner Rio Tinto sold a cargo of 62%-Fe Pilbara Blend lump Wednesday at $62/dmt CFR China on COREX, according to sources with access to the platform.
The 70,000 mt shipment will load August 18-27.
Rio Tinto also sold 62%-Fe PB lump through a spot tender Tuesday at +$0.1108/dmtu CFR Qingdao over the August average of the Platts 62% Fe IODEX assessment.
The 70,000 mt cargo will load August 15-24.
Rio Tinto was also heard to have sold last Friday 100,000 mt of 61%-Fe Pilbara Blend fines at $51.06/dmt CFR Qingdao through a spot tender, sources invited to participate in bidding said.
The PB fines cargo was co-loaded with 70,000 mt 62%-Fe Pilbara Blend lump which was sold through the same tender at $57.60/dmt CFR Qingdao. Both cargoes will load August 12-21.
Placing the PB lump cargo over the fines portion of the shipment yielded a lump premium of +$0.092/dmtu CFR Qingdao.
But not all sources felt the demand situation was improving for lump material.
"Demand for high grade ores among Chinese buyers is pretty bad now, whether it be for lump, fines, concentrate or pellet," a source at an international trading house said. "For lump, lower quality material from junior miners is actually proving more popular than mainstream Australian lump cargoes."
Sources have been saying that demand for medium grade material has been proving more popular than those of high grade ores, with trades for the former holding up despite more cargoes being supplied into the market. The same could not be said for the latter.
Source: Platts
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