Spot pellet premiums turned weaker this week as Chinese steelmakers exhibited little interest in premium feedstock materials given ongoing weak steel prices.
Platts assessed the spot blast furnace pellet premium Wednesday at $12.25/dmt CFR North China over the 62% Fe Iron Ore Index, or IODEX, assessments, and after adjustment to 65% Fe basis, down $1.25/dmt week on week.
The assessed pellet premium was normalized to typical specifications of 65% iron, 0.35% alumina, 5% silica, 0.02% phosphorus and 0.003% sulfur.
Physical properties specified by the assessment are 250 cold crushing strength (CCS), and a maximum sizing of 2.5% under 5 millimeters.
"High grade materials are difficult to attract buyers now," said a Beijing trader.
A Beijing-based trader heard that a parcel of 64.47%-Fe Vale pellet was traded at premium of $12/dmt Monday.
"I believe this ($12/dmt) is below the cost curve of the miners level, but sellers have no choice as they need to lower price to entice demand," the trader said.
Given the limited buyers for pellets in China, sellers noted that it is even more difficult to find buyers especially when end-users were struggling with poor demand for steel at the downstream.
Two steelmaker sources who have contractual agreements with Samarco confirmed that November and December arriving cargoes have been cancelled.
However, despite the outage of pellet supply from Samarco, these two steelmaking sources said it is unlikely to lift the pellet premium in the short run as there is still a overflow of pellet supply in the spot market.
"The outage of pellet supply from Samarco has no impact to us as we have enough pellet inventory at hand," one of the contractual buyers said.
The Samarco operations include a three tiered tailings dam complex, of which the Fundao dam collapsed two weeks ago, which also affected the downstream Santarem dam.
