Seaborne prices continued to strengthen Thursday on stronger end-user confidence in steel margins.
S&P Global Platts assessed the 62% Fe Iron Ore Index at $68.20/dry mt CFR North China Thursday, up $1.05/dmt from Wednesday. The front-month January TSI swap was up $1.45/dmt from Wednesday at $66.50/dmt.
Recovering steel prices supported demand for iron ore, with some end-users having increased confidence in the sustainability of steel margins.
"There are end-users who expect margins to remain stable in the near-term and are looking to procure more inventories," a Chinese mill source said.
Prices for steel products have risen after hitting a bottom, and higher margins will provide support for iron ore demand, another mill source said.
Traders have been more aggressive with their bids Thursday, with higher demand for cargoes arriving before the Chinese New Year holidays, a Singapore-based trader said. Most shipments on hand have been sold, the source added.
The spot price for square billet in Tangshan was at Yuan 3,330/mt ($484.23/mt) ex-stock Thursday, up Yuan 20/mt from Wednesday.
More stringent environmental cuts are expected in Tangshan, leading to a more cautious approach to procurement being favoured by some end-users.
"It would be preferable not to commit to large cargoes given the current market environment. If margins remain stable when further production cuts are implemented, having the option to utilize more low alumina cargoes would be ideal," a Chinese mill source said.
"Recent environmental controls have not met the government's expectations of lower air pollution levels, and blast furnace utilization rates will be cut," a Tangshan-based source said.
Weaker demand for some discounted fines were observed on rising prices.
"It is less cost effective to continue buying MAC fines given its narrowing spread with Pilbara Blend fines (PBF) leading to fluctuating discounts this week," a source said. "Buyers of MAC fines are more likely to prefer more forward loading dates, which are priced against the January index, due to the current backwardation," the source said.
Some market sources expected the recent increase in supply of seaborne cargoes to reach downstream demand soon, driving down prices in the near term.
"BHP is awarding tenders nearly every day this week and other suppliers might look to deliver more cargoes before the end of the year," an eastern Chinese trader said. "I am afraid that the increase in supply volume will be released downstream, driving down prices," the source added.
Lower inventory at steel mills and at the ports are expected to continue strengthening prices at the port stocks market.
"Low inventory cycles at many mills will result in more frequent restocking activities," a Shanghai-based trader said.
Platts iron ore 62% Fe iron ore port stock index, or IOPEX North China, was assessed at Yuan 549/wmt FOT Thursday, up Yuan 3/wmt from Wednesday, or at $71.16/dmt on import parity basis.
IOPEX East China was assessed at Yuan 541/wmt FOT Thursday, stable from Wednesday, or at $70.03/dmt on import parity basis.
Stronger Newman Blend lump prices were heard at the ports amid a lack of offers.
"Some sellers are not offering lump today on expectations of higher prices in the near future," a Chinese trader said.
S&P Global Platts assessed the spot lump premium at $0.3803/dry mt unit on Thursday, up $0.0603/dmtu on the day.
