China's steel mills hunt for high-grade iron ore to boost output
By Ruby Lian and Gavin Maguire
SHANGHAI Aug 31 (Reuters) - Cashed-up Chinese steel mills are chasing top quality iron ore to help increase output and meet Beijing's tougher environmental standards, driving the premium for high-grade ore to its biggest in two years.
In the latest sign of renewed optimism among China's steel producers as capacity cuts boost steel prices, producers are turning away from cheaper ore with a lower iron content, contributing to growing stockpiles at domestic ports.
The preference will help boost top miners such as Brazil's Vale and Australia's Rio Tinto and BHP Billiton , whose premium quality ore has been taking market share from China's domestic producers.
Iron ore with a 61.5-percent ore grade was trading at a premium of 123 yuan ($18.42) a tonne to 58-percent grade at Chinese ports last week, a level last seen in mid-2014, according to data from industry website Mysteel. (tmsnrt.rs/2bwmHqj)
Chinese steel prices have risen following mill closures and output curbs flowing from an environmental crackdown and Beijing's efforts to tackle a supply gut, buoying mills' profitability. China has promised to slash steel capacity by 45 million tonnes this year.
"We've had pretty good sales over past few months, as steel mills are profitable again since June," said an iron ore trader in Beijing, who sells 65-percent iron ore.
"They like to buy higher grade ore as this can help increase steel output, leading to surging premiums."
A tonne of 61.5 percent ore is currently selling for 445 yuan a tonne at eastern Rizhao port versus 370 yuan for a 58 percent ore. Continuación...