Crude steel production cuts that are gradually being implemented in China have resulted in a switch in preference for iron ore brands among steelmakers in the country, sources told Fastmarkets.
While the overall demand for iron ore has started to weaken, low-grade fines are generating more buying interest, sources said.
A month ago, low-grade fines
started to gain favor among mills amid weakening margins and a tight supply of mid-grade fines.
And while steel prices have been rising since then on expectations of production caps in the second half of 2021, they have so far not been able to improve demand for high-grade and mid-grade iron ore, sources said.
But demand for low-grade fines continued to improve, they said.
"The crude steel production cuts have pushed more steel mills in China to switch their blends to low-grade fines because there is no need for them to increase output. As such, despite the improved margins in July, there is no need for them to consume high-grade iron ore to maximize steel output," a trading source in Shanghai said.
"There is still...