Iron ore lump prices surge on China environmental curbs

Seaborne lump prices have increased over the past few weeks as environmental restrictions in China boost demand for direct-charge material, while higher prices of 65pc basis IOCJ fines have prompted mills to use more lump.

Five Newman blend lump deals have been reported on the Globalore platform on a fob basis over the past month, with prices increasing in successive transactions. Two cargoes were sold at premiums of 23.5¢/dry metric tonne unit (dmtu) and 22¢/dmtu to the reference July 62pc fines index on 13 June. That followed a sale of a cargo at a 20¢/dmtu premium to the June 62pc index on 1 June and sales at 19.10¢/dmtu and 19.20¢/dmtu premiums to the June 62pc index on 17 May.

The Argus 63pc Fe lump premium reached 21.40¢/dmtu to the Argus ICX 62pc fines index on 13 June, the highest since 27 October last year.

Environmental curbs in Shandong and Tangshan have helped pushed lump demand higher. Shandong put restrictions on steel operations from 1-11 June because of an international conference in Qingdao, while Tangshan has imposed frequent curbs on sintering to fight rising pollution levels in the city. The latest such restrictions, requiring mills to reduce sintering by 50-100pc, expired on 17 June. Sintering restrictions have also been imposed in Jiangsu province recently as the government looks to cut air pollution along the Yangtze river.

A shortage of low-alumina ores has also lifted prices of Vale's 65pc IOCJ fines sharply over the past month. The spread between Argus 65pc fines and 62pc lump prices has widened to $10-12/dmt since 4 June compared with $6-8/dmt previously.

Mills are demanding more lump, especially as prices of IOCJ fines and BRBF fines have started increasing sharply over the past few weeks, said the manager of an east China-based mill.

Demand for lump has increased because of the environmental restrictions, said the manager of a state-owned trading firm. The firm offered a combined cargo of PB fines and PB lump flat to the 62pc fines and lump indexes respectively. The PB fines cargo got a best bid of a 30¢/dmt discount to the fines index, but the lump portion was bid at the offered level.

A combined cargo of PB fines and PB lump with 25 June to 4 July loading dates was offered at flat to the July 62pc fines index for PB fines and at a 50¢/dmt premium to the 62pc lump index for PB lump. The offer indicates demand for PB lump is much stronger than that for PB fines, said a north China-based trader.

Tight supply of Newman blend lump at the northern ports of Tangshan and Caofeidian has lifted prices in these portside markets. Repeatable prices for Newman blend lump in Tangshan are at 625-630 yuan/wet metric tonne, a seaborne equivalent of $82.85-87.15/dmt assuming 16pc value-added tax and 8pc moisture. Similar cargoes are selling at Yn590-600/wmt at Shandong ports.