Demand for Carajas iron ore fines at a time of weaker overall iron ore import appetite continues to increase the spread between the Platts 65% Fe index and the benchmark 62% Fe IODEX reference in China.
The spread rose above 13% on an equivalent basis April 19, the highest in four months. The move is being scrutinized further after IODEX fell around a third since mid-March, shaking up product and grade differentials.
Brazilian miner Vale was heard April 19 to have sold 90,000 mt of 65% Fe Carajas fines at $77.50/dry mt CFR Qingdao on globalORE, arriving May. The trade was done after 5:30 pm Singapore time.
A firm offer for Carajas through globalORE at $81.50/dmt CFR Qingdao was reported by S&P Global Platts April 17, for a 170,000 mt cargo.
Analysis continues below...
Platts IODEX on April 19 rose $1.35/dry mt day on day to $65.15/dmt CFR North China. The Platts 65% Fe index increased $2.65 to $77.15/dmt.
Platts data showed its 65% Fe index rose to a 13% premium on a dry mt unit over IODEX 62% Fe benchmark fines, the highest since November 23.
For March, monthly averages for IODEX at $87.11/dmt and 65% Fe at $100.25/dmt shows a premium of 9.8% dmtu basis for the higher grade fines.
Like other iron ore brands, Carajas has succumbed to weaker iron ore pricing in China, following several spot trades for the northeast-based Carajas mine fines surpassing $100/dmt CFR China in the first quarter.
However, the coarse sinter grade with high-iron purity remains coveted, and has continued to price well above lump this month and close to high silica lower Fe import pellets.
The price relationship may be harder to define as values drift and find new footings following a sharp sell-off in iron ore over the past two weeks.
A trader following the Carajas transaction expected a similar cargo loading in Brazil during April and arriving in China late May or early June may have been slightly discounted, as a May arrival could have warranted a prompt premium.
"It may also be that medium grades are so well offered and we have come down so fast and so far" that the relative price gap has expanded, he said.
China market change
An iron ore supplier in Asia commenting on China's market changes said lower grade iron ore stockpiles may be being increasingly depleted, with mills focusing more on costs. This is after a month of sustained steel price falls.
Demand for steel longer term may assure some market stability, and demand for lump at current premiums of $1.34375/dmt basis may improve as there is renewed focus on sintering costs, the supplier said.
China's focus on steel output and utilization, which led to high mill output rates in March, may not translate to a sudden shift down in lower April steel output, he said.
The trader said low grade iron ore demand was picking up, and it would follow that lump demand may also kick in as steel margins have narrowed.
He expected lump use in the overall iron ore burden at large mills had fallen due to high coking coal prices this year, but remained above 15% and closer to 20% with some scope for increases.
Support for Carajas iron ore
Global demand for Carajas iron ore remained supported after silica from alternative products in Brazil crept up, and as some buyers also scrutinize alumina levels from other sources.
Higher global coking coal and coke prices, and demand for China to export the materials after cyclone damage in Australia hit coal shipments, may further support demand for ores such as Carajas, which reduce coke needs.
Carajas is a reference used in higher iron grade spot market indices, which in turn may be used for other ores including concentrates.
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