FOCUS: Low-grade iron ore back in favor amid narrowing margins

Chinese steelmakers are increasingly adjusting their sinter feed ratios to consist of more low-grade iron ore to go with the high-grade products they are already consuming - instead of mid-grade fines - amid rising costs and weakening margins, market sources said.

The switch mirrors that in the third quarter of 2020, when low inventory levels for mid-grade fines at Chinese ports led to price increases for such products against a background of strengthening steel demand in September and October, sources said.
Much like last year, the recent narrowing of steel margins is causing Chinese mills to increase their consumption of low-grade iron ore fines to save cost, sources told Fastmarkets.
Weakening margins
The margin proxy for rebar producers shrunk by 376.77 yuan ($58) per tonne in May on a daily average basis to 434.29 yuan per tonne, Fastmarkets data showed. This is a 46.5% drop from April.
Meanwhile, Fastmarkets' margin proxy for hot-rolled coil producers decreased by 26.1% in May on a daily average basis from April's 1,309.56 yuan per tonne.

The shrinking margin proxies were largely due to the rising cost of producing...

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