CIS iron ore pellet premiums may weaken as supply improves: sources


Lower quality iron ore pellets in particular may be seeing the recent high in premiums starting to unwind, buyers and suppliers said this week.

Russian and Ukraine-based acid pellets with higher silica may see pricing revert back to steeper discounts against premiums command by lower silica and higher strength blast furnace pellets, according to sources.

With $45/dty mt as a annual contract reference for now, premiums for high silica grades may have slipped, as tightness in the market has reduced over the past three months.

In the fourth-quarter of 2016, the difficulty in securing supply and loading schedules suggested a different market given what is available today, said buyers. The anticipation of Samarco’s return to supply after an extended idling and talk that blast furnace grades will be the focus has added to the notion of a resumption in balance.

One buyer indicated $37/mt as a premium offered by a Russian pellet supplier with open volume said available to contract multiple cargoes or spot sales.

A CIS marketer contacted Friday declined to comment specifically while stating supply was tight, and premiums had not lowered on realizations to date.

A buyer said lower steel output than planned had contributed to reduce demand for pellets, and there was no expected further coverage needed for the year.

A recent spot sale may show up a gap between qualities, as any surplus lower grade pellets may have to chase buyers in China and premiums that sunk below $20/dmt.

“For high quality there is scarcity, and DR is tight but commodity grades, you see lower prices into Russian and Indian pellets,” said a mining source.

“It is undeniable but this has affected commodity grade pellets, principally,” said the supplier.

He added steel utilization targets and steel orders and prices were leading to stable and high demand for pellet in Europe.

An Atlantic cargo for end-March loading at $48.50/dmt premium for a 2%-2.5% silica blast furnace grade was reported as done to a European customer. The pricing framework was said to be aligned to contract-based trade which uses formulas in netbacking to IODEX 62% Fe and iron adjustment.

Source: Platts 

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