The price differential between Argus-assessed 62% and 65% iron ore fines widened to a record high on 4 July, driven by robust demand for the IOCJ grade and sluggish buying interest for most medium grade fines.
The spread between Argus 65% fines and the Argus ICX price for 62% fines widened to US$28.35/dry tonne (dt) on 4 July, a level not seen since the assessments began in May 2013. The 62 - 65% index price differential has widened to more than US$27/dt in the first two trading days of July, up from US$22 - 25/dt in June and US$12 - 15/dt at the start of the year.
Rising prices for 65% IOCJ fines, a key input for the Argus 65% price, have been the main factor for the increase. A cargo of 65% IOCJ fines with early June loading dates sold at US$83.05/dt on 28 May on the Corex online trading platform, while an early July loading cargo sold at US$91.70/dt on 29 June on the platform. The Argus 65% fines index has increased by 6% since 1 June, while the ICX price has fallen by over 2% over the same period.
Soaring penalties for alumina and tight supplies of low alumina fines from Brazilian mining firm Vale have helped blow out the differential between high grade and medium grade fines.
Vale's BRBF fines and IOCJ fines have 1.5% alumina each compared with an alumina content of as much as 2.6% in PB fines, the most liquid seaborne product that is supplied by Australian mining firm Rio Tinto. This amounts to around a 1% alumina difference between the major sources of liquidity for the 62% and 65% indexes.
The Argus alumina value-in-market adjustment increased to US$6.50/dt per 1% alumina last week from US$1.65/dt per 1% at the end of May, or about a US$5/dt increase over the same period where the 62 - 65% index differential rose by more than US$7/dt from below US$20/dt in late May.
Trading firms could consistently count on premiums to trade floating basis PB fines cargoes, but these are have been trading at a discount of 50 - 80¢/dt to the monthly 62% index average in the off-screen market. Fixed price screen deals of 61% PB fines have been in a US$61 - 65/dt range over the past month.
Rio Tinto may lower PB fines alumina levels to 2.35% by removing RTX-F fines from the PB fines blend to lift its floating premium. Rio Tinto has started offering RTX fines as a standalone product to Chinese steel mills.
Shrinking production of domestic concentrate because of environmental restrictions on opencast mining in China has lifted demand for imported low alumina ores including BRBF fines and IOCJ fines. Mills are trying to seek cheaper options for low alumina fines, such as Mauritanian grades, but these have limited supplies. Several steel mills in south and north China have lifted the proportion of Brazilian fines significantly in their furnace burden over the past month.
Mills are also using more lump in the furnace burden, as prices of 62% lump cargoes continue to lag 65% fines prices despite the lump premium to the 62% fines index currently at a year's high.
The increase in 65% prices has also pressured the floating premium of imported pellet feed concentrate cargoes, which are offered on a 65% fines basis. An offer on 4 July for low sulfur Chilean Atacama concentrate was at a US$5/dt premium to the 65% index, while a similar cargo was offered at a US$8/dt premium to the index in mid-June.
Read the article online at: https://www.drybulkmagazine.com/dry-bulk/05072018/price-differential-between-iron-ore-fines-widens/