FOCUS: Intergrade price spread for iron ore collapses amid surging volatility

The spread between prices for 65% Fe iron ore and 62% Fe products have narrowed rapidly in recent weeks due to the former weakening at a faster pace than the latter.

This has resulted in a mixed long-term outlook for high-grade fines, market sources told Fastmarkets.
Narrowing spread
As hints of the central Chinese government’s intention of keeping this year’s output from exceeding last year’s began to emerge in July, expectations of a drop in demand for iron ore grew, which dragged down prices for the steelmaking product, particularly high-grade fines, sources said.
The bearish outlook for iron ore demand in the second half of 2021 triggered a rapid downtrend in prices, resulting in an increase in volatility, a trading source in Shanghai told Fastmarkets.
“From July, the weakening demand dominated the fundamentals for iron ore and prices started to fall. But compared with mid-grade fines, high-grade fines generated less buying interest because steel mills in China have no need to maximize steel output,” he said.

As a result, prices for high grades dropped faster than mid-grade fines,...

Published

Zihao Yu

August 24, 2021

10:00 GMT

Singapore