Global direct reduction iron output in May have risen 8.5%, boosted by Indian production, while output trends for DRI in the Persian Gulf produced via imported iron ore pellets were mixed, according to latest World Steel Association data released late Tuesday.
DRI global output rose to 5.133 million mt in May, with production slightly below April's 5.155 million mt, also factoring in the extra day of output in May over the previous month.
The Worldsteel data does not include DRI production from several producers, among those active in Russia, the US, Oman and Trinidad.
Qatari DRI output of 219,000 mt, and Saudi Arabian producer Hadeed's 400,000 mt marked falls both against May 2016 and April.
Meanwhile the UAE, with 272,000 mt, and Egypt, with 320,000 mt, posted large annual DRI growth, with Egypt showing stronger output in May than in April.
Iran produced 1.62 million mt of DRI in May, up 13% on May 2016 and at the highest monthly rate so far this year.
Analysis using DR-grade pellet premiums -- S&P Global Platts assessed for June unchanged on May at $54.50/dry mt -- and underlying iron ore fines data showed improving indicative fundamentals with regional spot prices of rebar steel, merchant pig iron and ferrous scrap in May.
The analysis uses fised natural gas prices and cash costs at plants, with 67.5% Fe DR pellets adjusted for iron quality.
As iron ore fines price fell steeply in the past few months by over a third, the gap for DRI's indicative costs with competing and related ferrous raw materials and steel widened.
Availability of iron ore pellets of the required grades in a tight market for low silica and low alumina grades is a long-running market concern.
An increase to premium prices offered this year for pellets under long-term contracts may have created some undersupply in the DRI feedstock.
Less regular purchasing patterns to seek out lower prices, and tests for higher grade blast furnace pellets to blend with DR grade material is seen.
India produced 1.27 million mt of DRI up 2.3%, with much of the output sponge iron using iron ore such as lump and coal as a reductant.
Worldsteel's data is based on its members' reporting figures and the group revises earlier estimates with final data when updated information is received.
