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Disruptions lift Chinese iron ore concentrate

16 Apr 2018 06:08 (+01:00 GMT)
Disruptions lift Chinese iron ore concentrate

Singapore, 16 April (Argus) — Demand and prices of imported pellet feed concentrate have spiked over the past week in China amid supply concerns.

UK-South African mining firm Anglo American, one of the world's largest pellet feed concentrate producers, suspended output at its Minas Rio iron ore mine in Brazil for 90 days earlier this month after it identified a leak in an iron ore slurry transportation pipeline to a port facility in Rio de Janeiro state. Fellow pellet feed producer Iron Ore Company of Canada has had production disruptions since a workers strike since 27 March. The workers will vote on a draft agreement to end the strike tomorrow.

Concentrate supplies from Brazil have also been disrupted over the past several weeks because of port maintenance operations.

China's domestic concentrate output has been falling in recent years because of mines being shut down by the government to reduce air pollution. Such restrictions are unlikely to lifted anytime soon.

Deals over the past week have mostly emerged for Ukraine, Peru and South Africa-origin concentrate.

Deals for Ukraine-origin concentrate were at $7.90/dry metric tonne (dmt) and $7.50/dmt to the May 65pc fines index last week. A similar cargo was sold at a $4/dmt premium to the April 65pc index on 3 March. An offer for a Ukraine pellet feed cargo was done at $3.50/dmt to the 65pc index on 8 March and received a highest bid of a $1.50/t premium.

A cargo of 70pc Fe Peru-origin concentrate was sold at a $13/dmt premium to the 65pc index last week, while a deal was done at a $11/t premium to the 65pc index last month. A couple of May-loading date South Africa-origin Karara concentrate cargoes were sold at a $6.50/dmt premium to the May 65pc index on the Corex online trading platform.

Demand for concentrate has also been boosted by sintering restrictions in key Chinese steel producing cities, such as Handan in Hebei province. Chinese mills are stepping up direct-charge material use, pellet and lump, to maintain productivity and maintain low emission levels. Steel mills across the country have committed to low emissions standards and have been issued discharge certificates based on those commitments by the government. The ministry of industry and the Hebei provincial government have already suspended operations and issued warnings to mills that are not meeting emission regulations.

Demand for imported concentrate is heaviest in south China and comparatively lower in Shandong and north China, said a Beijing-based trader.

Some of the concentrate cargoes have been bought by trading firms hoping to sell at a profit later, as they are betting on demand to rise further, said the manager of a Ukraine-based mining firm.

Concentrate prices may remain supported in the short term as supplies are unlikely to dramatically increase this month. But with prices already high, any upside could be limited.