07-05-2016

Vale sets May term premium at $1/dmt for Brazilian Blend iron ore fines: sources

Vale

Brazilian iron ore miner Vale has raised its term premium for Brazilian blended fines, or BRBF, cargoes to $1/dry mt to an IODEX-based matrix for May delivery cargoes at port stocks, term buyers said Friday.

BRBF is sold at several ports in China. The term differential was set at parity for April when Vale started selling at quayside bonded house last month, according to market sources.

Sources also said that minimum lifting quantity is 50,000 mt per lot for term buyers.

Vale’s Singapore office could not be reached for comment on the matter. BRBF cargoes typically contains 62.5% iron, 1.8% alumina, 5.2% silica, 0.07% phosphorus, 0.3% manganese, 2.7% loss on ignition and 7.5% moisture.

As seaborne cargoes for mainstream fines are trading at premiums of around $2/dmt to IODEX in the spot market for June delivery, some sources felt that the term premium of $1/dmt is acceptable at the moment.

“Supported by decent production margin, cargoes with iron content higher than 61% Fe are very popular among end-users as steel enterprises are trying to increase pig iron production rate. [The] $1/dmt premium is still acceptable so far,” one of the term buyers said.

Due to its low alumina and phosphorous levels, Brazilian fines is “irreplaceable” to some blast furnaces. In this regard, some buyers said that they have to accept $1/dmt premium.

“You cannot replace all the feedstocks by Australian fines, but just try to reduce usage of Brazilian fines in the future,” a large-size steelmaker said.

The increase in the term premium for BRBF came, after the miner set a premium of $2/dmt to an IODEX-based matrix for April-delivery Southern System fines for term contract buyers.

But looking ahead, some sources are concerned over their term contracts with Vale.

“As a term buyer, we have to abide by the premium set by the miner. But when steel production margin falls to negative in the future, there is no need to use medium or high grade fines as it is not cost-effective compared to the other feedstocks,” said a procurement source from Shandong.

Another term buyer added that “we can carry out current term contract at the moment, it is impossible to increase volume anymore.”

Source: Platts

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