Chinese steel mill margins have been extremely healthy this year, averaging around $131/mt for hot-rolled coil and $139/mt for rebar. This has provided mills with favorable cash flows and incentives to purchase high quality iron ore, lump and pellets. Environmental protection restrictions and strong crude steel output have supported lump and pellet premiums. However, conversations with mills for our latest quarterly survey indicate they expect margins to tighten on softer winter production cuts and tepid demand. This could put downward pressure on premiums for lump and pellets and some higher grade ores.
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