Supply tightness lifts iron ore concentrate prices

Spot premiums for iron ore concentrate have nearly doubled for some grades this week, supported by tight Australian supplies that are more than offsetting weakness in pellet markets.

Australian concentrate spot premiums rose to $2.50/dry metric tonne (dmt) above the 65pc fines index on the back of a Karara tender closing at a $2.50/dmt premium to May 65pc index late last week. This is up from an indicative $1.30/dmt premium last week. Karara's previous tender closed at $1.80-2/dmt above April 65pc index.

Ukrainian concentrate spot premiums rose by 30¢/dmt to 90¢/dmt above the June Argus 65pc fines index. Australian concentrate cargoes with a shorter sailing time than Ukrainian cargoes index against a nearer quotation period, which with a backwardated curve widens their premium.

The main driver for the higher premiums was the limited number of spot tenders for Karara concentrate from Australia. "The premium for imported concentrate has risen slightly on worries of tighter supply of imports," a south China trader said.

Limited spot supplies of seaborne concentrate, a pellet feedstock, are allowing it to sidestep weakness in seaborne pellet markets. The varied movement is raising the markets' profile in China. "We have started to pay attention to the supply of imported iron ore concentrate and pellet from the non-mainstream market, which will impact China's market," a Shanghai-based trader said.

A seaborne supplier has shifted away from pellet in response to the higher demand for concentrate. UK-Australian producer Rio Tinto's joint venture Iron Ore Company of Canada (IOC) has temporarily halted two pellet machines in Labrador city in response to market demand for concentrate, Labrador Iron Ore Royalty said last week. "The demand for concentrate remains strong. IOC is in a unique position to be able to adjust its supply of product to align with changing market conditions," it said.

Chinese domestic concentrate prices are not getting a boost from the seaborne market. Domestic prices moved lower this week, pressured by increased supplies from the restart of mines after winter and the country's Covid-19 outbreak.

Tangshan domestic concentrate was priced at 785 yuan/dmt ($111/dmt) including delivery and value-added tax (VAT) yesterday, down by Yn15/dmt from 7 April. Domestic pellet was priced at Yn845-850/dmt including delivery and VAT, while Ukrainian pellet was priced at Yn1,030-1,040/wet metric tonne in portside markets.

"Domestic mining firms' production is recovering as the Covid-19 is well controlled recently," a Tangshan trader said. "We believe the supply increase will drag down concentrate and pellet premiums more in the near future."

By Kitty Xie and China staff

source: Argus Media