Discount levels for lower-quality medium-grade fines, such as MAC Fines and Jimblebar Fines, narrowed as Chinese mills became more cost-conscious amid subdued steel margins, according to spot trades tracked by S&P Global Platts.
Chinese steel margins tumbled in the second half of May, as downstream steel demand weakened seasonally. Although margins showed some signs of recovery in July due to tightened supply outlook amid the widespread steel production curbs, they remained at lower levels historically, according to Platts data.
Recently, MAC and Jimblebar Fines saw some buying interest return as thin steel margins prompted more Chinese mills to look for cheaper medium-grade fines due to cost factors. These two brands’ differentials against the Platts 62% Fe index — the spreads between their outright prices and the Platts 62% Fe index — narrowed as a result.
MAC Fines supply have been rising since June as BHP’s South Flank mine started production. Spot volume sold by BHP surged in June, spot trades tracked by Platts showed, weighing on its prices relative to the other medium-grade fines such as Pilbara Blend Fines, or PBF, Newman High Grade Fines and Brazilian Blend Fines.
However, as port prices for PBF weakened recently, market sources noticed that the price spread between PBF and MAC Fines narrowed, especially at Shandong Ports.
“Portside price spread between the two products is Yuan 45/wmt, compared to Yuan 70/wmt from a week ago,” said a Chinese trader source. “Demand for MACF is not that bad and there seemed to be an overcorrection in seaborne prices earlier,” said another Chinese trader source.
Jimblebar Fines saw its brand differential against the IODEX widen sharply in April and then early July, when spot supply of Jimblebar Fines rose.
Besides its ample supply, the tight availability of Carajas Fines since May and domestic concentrate since June also suppressed blending demand for Jimblebar Fines, as mills need to blend down the high alumina and phosphorous levels in Jimblebar Fines, typically with Carajas Fines and domestic concentrate.
However, as prices for Jimblebar Fines fell, demand showed some signs of recovery due to emerging cost-efficiency.
The volume of July-arrival Carajas Fines could recover, as suggested by the spot trades tracked by Platts. Some Chinese mills were also heard reselling their Carajas Fines volume under the term contracts back to the market due to production curbs. Sources already noticed some weakness in buying interest for Carajas Fines at Chinese ports recently. The improvement in Carajas Fines availability could provide some support to the blending demand of Jimblebar Fines in the near term.
Source: Platts