The official end of the winter heating season in China - the world's largest iron ore consumer - a few days ago has coincided with a pick-up in market interest in the price spreads between different grades of the steelmaking raw material.
On Monday April 1, a total of 350 lots of the Singapore Exchange's (SGX) 65% Fe iron ore cfr China futures contract were cleared and traded. The following day, 2,050 lots were traded and cleared.By 6.30pm Singapore time on Wednesday, another 300 lots of the contract had been traded and cleared.The pick-up in trading activity has been attributed by some market participants to traders taking positions on the spreads between iron ore grades. In the physical market, China's demand for high-grade iron ore is poised to rise in the months to come amid an expected seasonal improvement in downstream sectors.The price spreads between iron ore grades are driven - to a large extent - by the mix of available supply in the global marketplace and Chinese demand. Typically, when steelmaking profit margins narrow, mills will be more conscious of their input costs and start consuming lower-grade ores. Inversely, when steel...