Demand for mainstream medium-grade fines has narrowed the brand's differentials to the Argus 62pc ICX index, as mills purchase the lower-priced fines to replace higher-priced mainstream medium-grade fines and low-grade fines in China's spot iron ore markets.
Mills and traders have shown increased buying interest in the 61pc Fe Jimblebar fines and 60.8pc Fe Mac fines after Fortescue sharply reduced the discount on its 58.3pc Fe blended fines last week, narrowing the price differential with the lower-priced medium-grade fines.
Fortescue blended fines cargoes will be sold at a discount of 7pc to the March 62pc index compared with a 22pc discount on February index-linked cargoes, said Chinese market participants. Cargoes of Jimblebar fines were sold at $5.48/dmt and $5.50/dmt discounts to the March 62pc index on Monday. The average discount of Jimblebar fines calculates to 6.7pc to the March 62pc index based on these transactions.
Jimblebar fines deals were done at 586 yuan/wmt (at a seaborne equivalent of $77.20/dmt) and at Yn590/wmt at Caofeidian port. An offer for Fortescue blended fines was heard at Yn590/wmt, although Argus did not report any deals for the grade this week.
Jimblebar fines and Mac fines have higher Fe content compared with low-grade fines, making them attractive to mills seeking to replace part of their higher-priced medium-grade fines and lump in the furnace burden.
The price differential between Fortescue blended fines and Mac fines have narrowed to Yn10-15/wmt this week compared with around Yn30/wmt in mid-February in the portside markets.
Off-screen, a cargo of Mac fines was sold at a discount of $3/dmt to the March 62pc index. Mac fines was sold at Yn598/wmt at Caofeidian port this week.
Chinese mills have increased their focus on cutting costs rather than boosting productivity, as profit margins remained low after the lunar new year holiday.
Steel prices slumped in November, cutting mill profits to Yn100-500/t from over Yn1,000/t for most of 2018. Although steel prices have risen this week, mills are likely to wait to make sure that the price gains are not short-lived before raising output again.
Several mid-sized and large Chinese mills have premium mainstream fines such as PB fines and Newman fines at the core of their furnace burden, so demand for these ores will always provide some support in the market. But the premium for PB fines has fallen to around $1.60-1.70/dmt to the March 62pc indexfrom around $2-2.50/dmt in early February.
But some market participants expect the production shortfall at Brazilian mining company Vale to be felt in the Chinese spot markets in the near term as supply of Vale's medium-grade BRBF fines, a popular medium-grade ore in China, gets tighter. This may support prices of premium mainstream fines.
