Iron ore futures rebounded from previous trading day losses, amid a volatile market with narrowing steel margins.
The futures of Dalian Commodity Exchange (DCE) for September delivery then rose by 3.98% on-day or up RMB 45 to RMB 1,175/mt on Wednesday.
The steel rebar contract on the Shanghai Futures Exchange also jumped up by 1.31% or up RMB 65 day-on-day to RMB 5,035/mt.
Growing preference for low grade fines
Chinese end-users’ buying activities saw a shift toward lower grade fines like Yandi Fines and Super Special Fines.
As iron ore products with low alumina content were no longer sought as mills focused on cost savings rather than blast furnace productivity.
Some mills were even heard to switch to the high-low fines combination as it was cheaper than blending medium grade fines in the blast furnace mix.
Besides, the prices of high-grade fines like Carajas fines were expected to slide further due to shipment recovery from Brazilian miners in early June and more supplies were heard to arrive in July.
More high-grade ores to meet carbon emission target
More Chinese participants might seek for more high-grade ores to comply with Tangshan authority’s decarbonization push to reduce emission of 23 mills by 30%-50% by end of 2021.
Moreover, the push for decarbonization of the steel industry might also boost demand for direct feed iron ore products like pellet and lump in the long term.
Meanwhile, the emission control initiative was also in line with Chinese steel industry’s long-term goal of 30% reduction by 2030 and finally achieve carbon neutrality by 2060.