Brazil's Vale said Dec. 11 it has concluded contract pellet premium settlements for the first quarter of 2021, with price increases from Q4.
Vale said in a emailed statement that direct reduction premiums had been settled at $46.30/dry mt for Q1, based on premiums applied above 65% Fe fines.
This is up from a $24/dmt premium for DR pellets for Q4 2020, which Vale announced in September.
Vale said it settled blast furnace pellet premiums at $40/dmt for Q1, also on top of 65% Fe fines. This is up from $20/dmt for Q4 2020.
Steel mills acknowledged receiving premium offers since late November from pellet producers, seeking higher premiums than in Q4.
Settlements appear to have been concluded in the global DR pellet market at around $46.30/dmt for Q1, by Vale and several other pellet suppliers, depending on pellet specification.
The DR pellet market is tight, with higher quality pellets already indicated as allocated for the next few months, a buyer said. The situation with availability may change if contract performance reduces, as spot fines prices increased and total DR pellet prices edged toward the $190-$200/mt FOB range.
In the blast furnace pellet market, a $40/dmt offer on a 65% Fe basis, or higher premiums on a 62% Fe fines basis, have yet to be confirmed as settled widely, especially in Europe.
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In Europe, several steel mills confirmed ongoing pellet premium negotiations, on a 62% Fe IODEX fines basis, with settlements against the $40/dmt premium on 65% Fe index heard more widely offered in Asia and South America.
Iron ore pellet premiums applied to iron ore spot fines prices, which are at the highest in eight years, may push up iron ore pellet costs and reduce their competitiveness against lump ore, according to steel mill executives. Using more lump, and shifting procurement mixes longer term may follow, based on accepting higher pellet premium offers, a source said.
Vale currently has fewer iron ore pellet volumes shipped into Europe and Turkey compared with miners LKAB, Rio Tinto's Iron Ore Company of Canada, Ferrexpo and other Commonwealth of Independent States suppliers, according to market sources and company filings.
Some BF pellet volumes, expected to be from CIS suppliers, have been agreed since mid-2020 to also cover Q1 2021 volumes, with some business reported earlier at around $27-$29/dmt premiums on a 62% Fe basis.
Settlements earlier in Q4 for some Q1 blast furnace pellets were heard at premiums in the mid $30s/dmt on an IODEX basis, from two sources. The bulk of Q1 business into Europe is said to be currently offered at premiums above $40/dmt, with one offer heard at $45/dmt on a IODEX basis.
