Chinese buyers said they do not expect the lifting of trade sanction for Iran would lend much support in expanding their iron ore exports to China, given ongoing supply overhang and lackluster steel performance.
Iranian iron ore products typically have iron ore content ranging from 58-62% iron content for fines and 65-67% for concentrates, and they were heard sold to Chinese buyers on Platts 62%-Fe IODEX basis and a fixed price discount are further accorded based on market condition, sources said.
Iranian materials usually sailed to China on Panamax vessel and traveling time between Bandar Abbas, the main iron ore loading port of Iran to Qingdao in northern China could take around 24 days.
A Shanghai trading source was optimistic that the lifting of sanction would open more doors for Iranian sellers as Iranian fines have good sintering properties which could help them to find their home among more Chinese buyers.
"Before the sanctions, Chinese end-users would need to bring suitcases of cash to buy Iranian iron ore at the port, but the lifting of sanctions would mean they could buy directly from them on a credit term from the banks," said a Shanghai trader in reference on how a switch from a cash payment term to a credit system would be more palatable to Chinese buyers who were facing tight cash flow in lieu of poor downstream steel sales.
But many other were skeptical that Iranian iron ore exports to China would rise given the competitive pricing landscape, and they added the lifting of sanction for Iran comes "too late" to salvage the Iranian iron ore export to China.
The Platts 62% IODEX assessment hit its all-time lowest point since its launch in June 2008 at $38.50/dry mt on December 15 last year. It later recovered to $42.65/dmt as of January 18.
For 2015, Platts 62% Fe IODEX averaged $55.50/dmt CFR North China, which is $41.20/dmt, or 42.6%, lower than $96.70/dmt in 2014.
China imported 952.72 million mt of iron ore last year, up 2.2% from 932.34 million mt imported in 2014, customs data showed. Iranian iron ore exports to China were around 13 million mt in last year, down 7 million mt or 35% than 20 million mt in 2014.
"The Iranian fines are too little if you compare to the total iron ore exports to China, and they would only be able to find more fans if the iron ore market is still around the $140/dmt level but it is difficult now for them to compete given their higher cost curve, especially when iron ore price is barely above the $40/dmt Level," said a trader in Hebei.
Beside cost factors, Iranian fines were found to have exceedingly level of phosphorous and sulfur content than their mainstream Australian counterparts such as 61&-Fe Pilbara Blend fines and this could pose problems with Chinese steelmakers who are facing mounting environment scrutiny from the government.
An international trader told Platts that phosphorous level for some Iranian products could reach as high as 0.02%, which is much higher than other mainstream Australian fines that has range of 0.085% to 0.09%.
lower phosphorous content iron ore will be important to Chinese buyers as high phosphorous content ores would incur additional cost during the steel-making process, something that the Chinese could ill-afford given weak steel performance.
"Why would one ask for Iranian fines when you have so many tested mainstream fines such as Pilbara Blend or Newman fines which are easily available in the spot market, now the buyers are spoilt for choice," said a steelmaker source in central China who has used Iranian fines to supplement its steel production.
IROPEX, iron ore producers and the exporters association of Iran couldn't immediately be reached for comment on the matter Monday.
The lifting of sanctions, which came late Saturday, followed confirmation from the UN's International Atomic Energy Agency that Tehran had fulfilled its obligations under an agreement last summer to limit its nuclear program.
