Iron Scrap Price RANCHI 25600
Iron Scrap Price Kanpur 26000
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ING presented at the Metal Bulletin Iron Ore Symposium and heard miners' and traders' efforts to exploit China’s growing preference for higher quality feed. We agree a higher premium for higher grades is the new normal but also think these quality spreads will be the new centre of volatility Higher grades breaking free Since transitioning to an active spot market, iron ore prices have centred around those of the 62% iron ore grade fines (“the benchmark”). A high flow of consistent product from Australia’s Pilbara into China had provided the 1Bn+ tonne seaborne iron ore market this liquid reference price point from which premiums/discounts to other products (lumps, pellets, etc), impurities and grades could be pegged. But our conversations with iron ore traders, miners and steel mills gives us a firm conviction that the new Chinese drive for quality ores has changed these pricing dynamics for good. Specifically, it’s the higher grade prices (64%+ Fe) that are now diverging from the benchmark. The premium for the higher grades has become wedded to the profits of Chinese steel mills (profits=purchasing power). Thus prices at the higher end can increasingly be found to swing in almost complete disregard for a more tepid over-supply picture set to put a lid on the broader iron ore complex: low grades and perhaps more controversially the same fate holds for benchmark grades (62%) as well. See our forecasts: Iron ore, better supported post disruptions The collapse in correlation explains why the industry is calling out for new derivatives to hedge the prices of higher grades. The premium between 66% Fe and benchmark 62% Fe iron ore fines has swung dramatically in the last 12 months. From a long-running normal 15% price spread, it is now above 50%. In fact, a steel mill that locked in the 62% price this time last year, but buys at 66% Fe will have lost 3% on the hedge position but pay almost 30% higher on the physical prices. SOURCE- think.ing.com
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