Chinese portside iron ore narrows discount to seaborne

Portside prices of imported iron ore in China narrowed their discount to seaborne mainstream medium-grade fines last month, as steel mills stepped up purchases in the portside markets.

The Argus ICX 62pc seaborne fines price was at a discount of $2.55/dry metric tonne (dmt) to the seaborne equivalent of the Argus PCX 62pc portside fines price in October, narrower than $3.69/dmt in September.

The Argus PCX seaborne equivalent yesterday was at a $1.70/dmt premium to the ICX price.

The seaborne equivalent of Argus PCX price is calculated by assuming a 16pc value-added tax and 8pc moisture.

Mills are making a decent profit margin for landing seaborne cargoes and selling it on the portside markets, said an east China-based trader.

The yuan-based PCX price rose by 14.34pc in October compared with a 10.15pc gain for the Argus ICX price.

Portside price gains were led by a sharp increase in PB fines prices in key ports such as Shandong and Tangshan because of a shortage of stocks and robust demand for mainstream medium-grade fines.

The seaborne and portside markets may have divergent price trends in the short term. The seaborne market seems to be losing momentum with mills unwilling to bid at a higher premium to the 62pc index levels for brands such as PB fines and Newman fines. But buying activity remains brisk on the portside markets as stocks of key mainstream grades are in short supply, said a Shanghai-based trader.

Mills are expected to step up iron ore purchases, mostly in portside markets, to increase inventories during the winter months as transportation disruptions because bad weather is common.

Among the key brands tracked by Argus, the premium of yuan-based BRBF fines price to the PCX price fell to 5.26pc in October from 8.06pc in September. BRBF fines price has risen sharply over the past few months, which could limit further price gains as mills increase use of other grades to control costs.

Premium for Newman fines on the PCX price was unchanged at 2pc and discounts for PB fines and SSF fines were unchanged at 0.8pc and 38pc to the PCX price respectively.