Record premium for high-grade iron ore amid smog fight

The gap between high-grade and lowgrade iron ore shot to a record this week as China’s intense environmental clean-up pushed more steel producers to use higher quality material to boost output.

The increased appetite for highergrade iron ore has helped strengthen the market share of top suppliers Australia and Brazil to more than 80 percent of China’s total iron ore imports, forcing shippers of lower-grade material to offer steeper discounts to draw buyers.

Higher quality ore produces more steel for each ton that is processed, and can reduce emissions as less coke is used in production.

Iron ore with 62 percent iron content traded at $76.56 a ton on Wednesday, a premium of $29.75 over ore with 58 percent iron content, according to prices published by Metal Bulletin. That was the highest gap between the two grades since price records that date back to August 2011.

“Definitely the inquiries from our clients are now for medium- to highgrade iron ore. There’s less interest in low-grade,” said a Shanghai-based iron ore trader.

Underlining increased appetite for premium iron ore, China’s Dalian Commodity Exchange said it will adjust the quality standards for deliveries of iron ore to meet market demand for high-grade ore.

Steel output in China, the world’s largest consumer and producer, surged to a record 74.59 million tons in August, trumping the previous alltime monthly high in July.