The global iron ore pellets market and trade is surging at a phenomenal pace and 2019 will witness further acceleration in pellet demand and supply. Brazilian mining major Vale is negotiating a change in its 2019 iron ore pellet contracts from the current 62% Fe delivered basis to the 65% Fe delivered price.
Vale Ramping Up Production
It is expected that the change will lead to a price increase. Although it is as yet premature to forecast how much pellet prices might increase, that there will be a significant strengthening in prices is beyond all reasonable doubt.
The heated demand for iron ore pellets – as steel mills in China and elsewhere seek to use higher quality iron ore products in a bid to reduce coal use and carbon emissions – drove the mining company to resume operations at its Sao Luis,Tubarao I and Tubarao II iron ore pelletizing plant this year. As a result, sales rose from 73.29 MnT in Q2 CY 18 to 83.98 MnT in Q3 CY 18, up 15% Q-o-Q. The increase in sales is attributed to improvement in product quality.
According to data sourced by SteelMint, Vale’s pellet production moved up 8% between the second and third quarters of the current year amid ramp-up of Tubarao I and II pellet plants, along with the restarting of operations at Tubarao IV post maintenance. Vale estimates that global pellet demand will grow by 14% to 514 MnT this year from 452 MnT in 2017 and by another 18% to 602 MnT per year by 2025. The miner’s pellet production capacity is set to reach close to 60 MnT /year from some 50 MnT, including its Oman plant.
Pellet Demand Surges in Europe
In a related development, pellet demand in Europe is spiking, which is attributable to the relatively high prices of met coal and coke along with a surge in EU carbon prices over the year.
Carbon prices have surged, limiting the potential for shifts in pellet use and BF operations.Pellets may typically make up a third or more of iron ore burden at European BFs. Steel mills may face greater costs to cover any additional carbon dioxide emissions under the EU Emissions Trading System. Higher pulverized coal injection to reduce coke usage and the added stability to BF operations from the use of pellets are benefits adding to demand for pellets.
Premium coking coal prices have pressed above $200/MT FOB Australia in the fourth quarter, while spot prices for met coke exports in China neared $400/MT FOB again this month as domestic pricing and forward demand strengthened ahead of pollution cutting measures on installed capacity and coke rates.
India: Pellet Production, Exports Spike
The story is no different in India where pellet production and exports are on the ascendant. FY’18 was a buyout year for the Indian pellet industry in terms of production, capacity utilization, and exports. According to data compiled by SteelMint, Indian pellet capacity was 83.32MnT per annum this year and production stood at 59.6 MnT.
Production volumes are likely to expand in 2019 with Odisha-based Shyam Metaliks & Energy expanding capacity from 0.6 to 1.2 MnT per annum, XIndia Steel resuming pellet production and Brahmani River Pellet Limited raising production by 25-30%, not to mention the large-scale capacity additions in the steel industry.
Exports, likewise, will surge, especially to the major importer China where pellets are increasingly getting more preference over low-grade Indian iron ore due mainly to increasing environmental concerns.
3RD Indian Iron Ore & Pellet Summit
Keen to keep abreast of the global and South Asian pellet market movements in the coming year? Book your berth at the 3rd Indian Iron Ore & Pellet Summit to be held on 18 & 19 February, 2019 in Delhi NCR.