The price spreads between high- and low-grade iron ore continued to widen in May on robust demand for high-grade resources. However, such price spreads are likely to narrow as inventory increases.
As of Monday May 28, the price spreads between Carajas fines and Pilbara Blend fines stood at 155 yuan/mt at Qingdao port, compared with 129 yuan/mt a month ago. The price spreads between Carajas fines and Super Special fines stood at 327 yuan/mt, compared to 305 yuan/mt a month ago.
Steel mills maintained their preference for high-grade iron ore on wide profit margins and high coke prices. Coke prices rose in May as production at coke plants were limited on environmental woes. As of the end of May, metallurgical coke in Tangshan was offered at 2,050 yuan/mt, up 23% from 1,670 yuan/mt earlier this month.
Tight supply of high-grade resources in April also gave some support to the widening price spreads between high- and low-grade iron ore. As of the end of last month, high-grade ore accounted for 21% of the overall iron ore inventories at Jingtang port, compared to 26% at the start of the month.
However, high-grade Australian ore resources at the port saw its proportion climb up to 32% as of Tuesday May 29, from 25% in early May.
MMi Iron Ore Port Index remained unchanged at 465 yuan/wmt fot Qingdao on Tuesday May 29 for 62% Fe fines.
The index for 58% Fe fines was also unchanged at 319 yuan/wmt while the index for 65% Fe fines went up 1 yuan/wmt to 560 yuan/wmt.