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May 21, 2018

Energy rectifications drive up prices of iron ore fines in Zunhua, Hebei

SHANGHAI, May 17 (SMM) – Iron ore fines in Zunhua, Hebei province, rose 15 yuan/mt this week as supplies in Zunhua were limited by energy rectifications at iron ore concentrating mills, SMM learned.

The government of Zunhua issued notices to 88 iron ore concentrating mills on May 13, requiring them to cut their power supplies for rectification before May 16. All 88 mills have suspended production, SMM learned. Production will not recover until June as rectification checks are scheduled after June 1.

Overall capacities for iron ore fines are estimated to exceed 7 million mt in Zunhua. Output stood at some 5 million mt in 2017, according to SMM data.

As supplies of iron ore fines dropped sharply from rectification closures, steel mills in Zunhua had to purchase iron ore fines from nearby areas such as Chengde. This drove up the prices of iron ore fines in Zunhua and in some Tangshan areas.

On May 1, the Shanxi government began a two-month campaign to improve production safety at non-coal mines across the province.

Small mines in south Shanxi were most affected. Some small, private mines, found to have safety lapses or whose debris storage failed safety checks, were required to suspend operations for rectification for about a week. Output across these small mines accounted for 8-9% of output in south Shanxi. About 7,500 mt of iron ore fines is expected to be affected this month.

However, the overall output of iron ore fines across Shanxi province is unlikely to decline as the output in other big and medium-sized mines in Shanxi grew this week, SMM learned.

The market for iron ore fines in Shanxi remained weak this week. Encouraged by narrower price spreads between local and non local iron ores, local steel mills were keen to further bargain on prices. Mines were inclined to hold back from selling to support prices due to the lower-than-expected operating rates.

SMM expects this weak pattern to continue in the Shanxi market for iron ore fines in the short term.

SMM's MMi Iron Ore Port Index remained unchanged at 484 yuan/wmt fot Qingdao on Thursday May 17 for 62% Fe fines, compared to the previous day.

The index for 58% Fe fines rose 2 yuan/mt to 329 yuan/wmt while the index for 65% Fe fines dipped 1 yuan/mt to 578 yuan/wmt.

SMM and its new price index business Metals Market Index (MMi) launched the iron ore port indices on May 2 as port prices continued to gain importance in pricing iron ore.

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