Demand for lump was seen rising in China this week after sintering cuts were announced in Tangshan last weekend, with end-users looking to secure direct feed raw materials to continue steel production.
S&P Global Platts assessed the spot lump premium at $0.32/dry mt unit Tuesday, up $0.007/dmtu from Monday.
Local authorities in Tangshan in northeast Hebei province ordered steel mills to reduce sinter output over the weekend in a bid to reduce air pollution.
"Higher utilization of lump is a feasible solution for many end-users who are still looking to continue steel production amid narrowing margins and ongoing sintering cuts. Its usage in the blast furnace is also rather flexible and levels can be easily changed when needed," a Chinese mill source said.
"South African lump will be more readily available after the resumption of Transnet's railway operations. Up to a certain level, Assmang and Kumba lump can serve as a direct substitute for pellet in the blast furnace, presenting a lower-cost option for direct feed raw materials," a Chinese trader said.
Transnet's railway operations in South Africa, which transport Kumba and Assmang iron ore to Saldanha Bay port for export, have fully resumed after a truck collision closed the line on November 28.
"In addition, coke prices are expected to rise, and mills may look to lower their overall production costs with a measured increase in lump utilization and less coke usage," the trader added.
"Cheaper lump options like FMG and Roy Hill lump are seeing stronger demand from smaller mills with more flexible blend ratios, with the lower coke usage offsetting the lower Fe content than Pilbara Blend fines," another source said.
Port stock prices for lump have increased steadily since the end of November. Pilbara Blend Lump or PBL was heard to have traded in a range of Yuan 738-740/wmt at Qingdao Monday, up Yuan 8-10/wmt since November 30. Roy Hill lump was heard to have traded at Yuan 580/wmt at Tianjin Monday, up Yuan 10/wmt since last Friday.
Several traders said the spread between port stock and seaborne prices presented a reselling opportunity in the port stocks market.
"Seaborne lump is rather illiquid but there have been offers from the miners. Tradable levels of PBL could be up to $0.33/dmtu, assuming margins and current sintering cuts are unchanged," an international trader said.
