Steel mills have begun settlements after receiving blast furnace pellet premium offers for 2017 at $45/dry mt, with annual gains expected to surpass 25% on high demand to boost quality of burden and as supply remains constrained.
Pricing at least in Northeast Asia was heard getting established for premiums to settle at slightly lower levels than the offer, according to market talk Thursday.
A European source said he received the offer level from Vale, but added the Brazilian group has not yet concluded any agreements for volumes next year. Other European sources last week had no settlements to share, but confirmed negotiations.
Another supplier was not yet aware of settlements, but stated the offer level was well-known, and it would not be surprising for agreements to happen below this. Several economic and steel and raw materials market drivers would lead to an acceptance of higher pellet prices from last year's accords at a headline $32/dmt level, he added.
"Demand for high grade iron ore was encouraged after the spike in coking coal prices in the third quarter of 2016, as the higher the Fe grade the lower the need for coking coal in the steelmaking process," Vale said in a quarterly statement.
The prices heard are lower than current spot prices, while some suppliers had begun to price additional tons accordingly with the new annual premium target, said a source.
S&P Global Platts assessed estimated Atlantic monthly contract blast furnace pellet premiums at $35/dmt for October. Premiums moved higher as new fourth-quarter pricing in the mid $30s, and spot interest ahead of annual offers took the market up from earlier contracts settlements.
