Save
PrintIron ore pellet premium settlements in Europe for third-quarter contracts remain unconfirmed in the market as of Wednesday, as steel mills indicate there is little progress as miners seek to increase prices compared with the second quarter.
Mills were taken aback at offers heard around $36/dry mt for blast furnace pellet premiums, indicating a rise of $6-8/dmt compared with pricing agreed for Q2 in a range of just below $28 to the low-$30s/dmt.
This is based on offers for Vale products, with Samarco and Swedish supplier LKAB referencing similar premiums for a portion of contracts. The delay in settlement compares with earlier buyer expectations talks would have finalized by mid- to end-July.
A rise in spot pellet and lump premiums in China as environmental regulations cut domestic output is being noted, but not yet said to be affecting Europeans' access to seaborne tons.
In Japan, a $28/dmt reference has been agreed for the fiscal year started in April with Vale, and some other steelmakers have also achieved similar long-term fixed price agreements.
Another market source said $36/dmt was offered as applicable for six months, rather than only Q3. Vale declined to comment on pellet negotiations. One senior buyer was adamant that agreeing any price increase, against offers of the magnitude heard in the market, was difficult. He said talks were lengthy given premiums had recently been stable in a $28-30/dmt range.
Europeans and some Chinese and South Korean buyers are reportedly seeking to diversify more and making inquiries to Commonwealth of Independent States producers.
One pellet supplier said inquiries were coming in from new customers and those returning after a multi-year gap to seek contracts for several pellet cargoes.
Spot availability from Russia is low and cargoes for next year are in discussion. An EU mill buyer confirmed inquiries were made to test market levels and potentially lock in alternative supplies.
Production cuts at iron ore pellet plants in Brazil and Canada, alongside strong demand for both blast furnace and DRI pellet has tightened the market, but one key driver for tightness earlier this year has disappeared, another European mill executive said.
LKAB reduced output earlier this year due to operational problems in the Kiruna and Svappavaara pelletizing plants over Q1, but the Swedish miner reported operations returning fully back to capacity before the talks started. The European market is better supplied as a result, and the earlier tightness has abated, said a buyer.
The premium is based on offers for Vale products, with Samarco and LKAB said to be referencing similar premiums for a portion of contracts. Vale said earlier this month that demand for blast furnace pellets increased in Europe, and direct reduction pellet demand was steady in the Middle East, North Africa and North America. It does not sell any pellet to China.
In China, a shortage of domestic concentrate and pellet driving up demand for seaborne lump cargoes was observed for a second week.
Since sintering and pellet plants in the country cut output to help curb emissions and comply with environmental regulations amid recent sweltering heat, end-users have been depending more on imports.
Spot pellet premiums were heard at $25/dmt into China last week, and this week lump premiums as assessed by Platts rose $0.01/dry metric ton unit to $0.18/dmtu.
Steel mills can buy more lump or make more sinter, mill executives stressed. There is some spare capacity at sinter plants in Europe, they added. One said boosting sinter versus pellet would depend on the overall benefits of using direct feed to sinter, and underlying iron ore fines quality put into the plants.
Vale's recent higher silica and other gangue as seen in iron ore fines sales was a concern to him, and may limit pellet substitution should there be emphasis on certain quality parameters.
"They are having a big push, I don't know whether it will happen," a buyer said.
Copyright © 2013 Ferro-Alloys.Com. All Rights Reserved. Without permission, any unit and individual shall not copy or reprint!
- [Editor:editor]
Daily News
Research
Magazine
Company Database
Customized Database
Conferences
Advertisement
Trade
Tell Us What You Think