Iron ore quality differentials evolve as market fundamentals shift

Since January S&P Global Platts quality differentials for the gangue elements such as alumina, silica and phosphorous have evolved to reflect changing market fundamentals. The alumina differential soared 100% from $1.50/dmt in January 2018 to $3.00/dmt in May 2018. Phosphorous has also seen large increases from a steady $1.30/dmt throughout the last quarter of 2017 to $2.50/dmt on May 18, where it has remained. The most extreme moves have been seen across both silica differentials, but especially the high silica band of 6.5-9%, which collapsed from $7.00/dmt in January to $2.50/dmt today and is still on a downward trend despite a strong steel mill margin recorded to date.   A TIGHTENED SUPPLY The recent fall in the silica discounts has been triggered by an adjustment in global supply. The winter seasonal reduction in Chinese domestic supply, which typically contains elevated silica, was one contributor. The second was the announcement from Vale that it will cut 19 million mt of supply from the high-silica mining area, the Southern System. This has resulted in lower silica in Vale’s flagship product BRBF. The overall global balance of silica supply in iron ore products has declined, meaning silica differentials have retreated. LOW ALUMINA IN… continue reading

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Source: CTRM Center

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