Seaborne iron ore lump premiums saw slight gains Wednesday as spot trades indicated a stronger willingness among buyers to accept higher price levels. But Chinese end-users still remained skeptical about taking on more lump material when alternatives were proving most cost-competitive.
The Platts weekly assessment of spot lump premium was made at $0.13/dry mt unit, up $0.005/dmtu week on week and firming for a second straight week.
Australian miner Rio Tinto was heard to have offered 62.5%-Fe basis Pilbara Blend lump at a premium of $0.132/dmtu over the October average of Platts 62% Fe IODEX assessments on globalORE.
The 70,000 mt cargo was offered with a full-month October delivery period, but sources informed by the miner said the actual laycan was October 4-13. Rio Tinto started out offering the PB lump cargo at a premium of $0.14/dmtu over the October IODEX before it was lowered.
The counterbid stood at a premium of $0.128/dmtu over the October IODEX assessments.
Just after the 5:30 PM Singapore (0930 GMT) assessment timestamp, Rio Tinto sold the PB lump cargo at a premium of $0.132/dmtu CFR Qingdao over the October IODEX. But this trade was not reflected in the assessment process Wednesday as it was concluded after the close.
Rio Tinto also sold Tuesday a cargo of 62.5%-Fe basis PB lump at a premium of $0.13/dmtu CFR Qingdao over the October IODEX on globalORE, for a 70,000 mt cargo arriving October. Sources earlier notified by the miner said the actual laycan was October 2-11.
BHP Billiton was heard to have offered Wednesday 63%-Fe Newman Blend lump through a spot tender Wednesday, sources invited to participate in bidding said. The 90,000 mt parcel will load September 21-30. It was not known if the miner ended up awarding the tender at the market close.
"Sellers won't have much of a problem finding buyers at the $0.125-0.13/dmtu [CFR China] premium level for lump," a Beijing-based trader said.
A procurement source for a mill in Hebei said they could "accept a premium of $0.13/dmtu to buy lump but not any higher."
"Sintering costs are a lot more competitive now, and we've spent a lot of money on improving our technologies to comply with environmental regulations, so we're very careful about having to spend more on lump material. If we can use sinter feed, we will."
Sources also said both the lump premium physical and swap markets were in contango, meaning that more prompt-arrival cargoes were actually trading at cheaper levels than less prompt shipments.
A trading source in London said that the average of the October Platts lump premium swap value was trading at an average of $0.1425/dmtu Wednesday, the September average was trading around $0.13/dmtu and the November bid average stood at around $0.165/dmtu.
"[The lump curve] is indeed in contango from now until end [of the first quarter]," the source said.
Source: Platts
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