The winners and losers in iron ore discounting

Via Macquarie:

 The lump premium hit a record high of ~$25/t on September 8, according to MySteel. In this note, we take a deep dive in this niche segment of the iron ore market and highlight the key drivers behind the lump premium cycles. Panic buying by Chinese mills following government-led sinter production cuts has sent the premium well above its equilibrium level this month. Will it last?

 What is lump? Lump is a coarser type of iron ore that can be charged directly into the blast furnace (BF). Lump typically trades at a premium compared to the benchmark iron ore fines price because it saves steelmakers the cost of sintering. Contrarily to pellet, the production of lump requires little additional processing and thus incurs minimal extra cost for miners with suitable deposits.

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.