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Seaborne iron ore pellet premiums level out as fundamentals improve

Increase font size  Decrease font size Date:2016-01-08   Views:520
Seaborne iron ore pellet premiums were unchanged for a third week, as fundamentals appeared to be changing, with supply showing signs of easing and some demand emerging.

Platts assessed the spot blast furnace pellet premium against 62% Fe Iron Ore Index, or IODEX, at $10.60/dmt CFR North China Wednesday, after adjustment to 65% Fe basis, steady 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 or CCS and a maximum sizing of 2.5% under 5 mm.

"I am hearing that Ukrainian pellet supply is reducing, possibly because not that many producers can actually keep up with the current low prices," a Hebei-based steelmaker said.

"If this is true, we might see some stability or even improvement in pellet premiums, but this is also doubtful because it is tough to find buyers in China who really want to accept such expensive feedstock when they have cheaper alternatives like lump."

Additionally, with wintry conditions in China, domestic concentrate production has been falling. That has caused a decline in available raw material which Chinese mills can use to pelletize, sharpening the market's appetite for imported pellet, with demand heard to be on the rise after a lengthy period of weakening.

"Pellet is actually not that expensive now for a mill like us," a steelmaker in central China said. "Our pelletization costs are around $15/dmt and more expensive than other mills. So, imported pellet cargoes are better for us in terms of lowering our costs."

The steelmaker also said it was buying pellet from Australia in smaller lots and was planning to increase its uptake of imported pellet due to higher pelletization costs.

Seaborne pellet premiums still likely had a little room to fall because supply still outperformed demand, the steelmaker said. "But once supply eases, we will start to see support."

A steelmaker in eastern China said it made sense for mills to use more pellet now, adding it had increased the proportion of pellet used in blast furnaces because the cost of such material had fallen so much.

"I have received some buying inquiries for seaborne pellet cargoes. They are more popular compared to pellet material at the ports as premiums have gone down a lot for imported shipments," a Beijing-based trader said.

Since the start of assessments by Platts on October 7, 2015, pellet premiums have almost halved in value, having fallen $8.65/dmt, or 45%.
 
 
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