Atlantic iron ore pellet: Premiums jump for 3Q
Atlantic iron ore pellet premium settlements for the third quarter this year have risen sharply, despite a still bearish climate for steelmakers globally. Market participants had been anticipating an increase, but some were surprised by the extent of the rise.
Brazilian iron ore mining firm Vale "concluded its pellet premium definition process" for the third quarter of 2023 at a $60/dry metric tonne (dmt) premium to a 65pc Fe index, up by $15/t dmt from the second quarter for direct reduction (DR) pellets. The premium for blast furnace (BF) pellets was indicated by the producer at $52/dmt, up by $11/dmt on the quarter.
Wider output cuts are anticipated among European and north Asian mills in the face of low demand and falling prices, but weakness in seaborne iron ore fines indexes and consistently strong demand for DR pellets in the Middle East have been cited by market participants as the likely reasons for the sizeable increase in pellet premiums. The Argus ICX 62pc Fe fines index averaged $104.37/dmt cfr Qingdao in May, down from $125.75/dmt in February, when second-quarter premiums were settled. The Argus 65pc Fe fines index averaged $118.22/dmt cfr Qingdao in May, down from February's average of $140.24/dmt.
Demand has been stable in the EU pellet market, another Atlantic basin producer said. "Despite idling BF capacity in the EU, we see the lower demand is offset by less supply owing to suppliers' under-performance and reduced supply from the CIS. Hence we consider the seaborne pellets market still to remain rather tight," the producer said.
Vale's latest pellet premiums are not likely to be widely accepted in China, where 65pc Fe Iranian iron ore pellet is available at a $10/dmt premium to the 65 Fe index, Chinese traders said. Iranian exporters are looking to increase exports to China in the coming months as domestic steel production is expected to fall as a result of limitations on electricity supplies.
The differential between DR and BF pellet premiums has returned to what market participants consider a more conventional $8/dmt in the third quarter, widening from $4/dmt in the second quarter. Demand for DR pellets in the Middle East was constrained earlier this year by gas supply shortages, which have since eased. Natural gas prices that climbed to record-highs last summer have also fallen sharply, with the front-month Dutch TTF gas price at €26/MWh today, down from more than €300/MWh in late August.
The true steel demand picture will be the ultimate driver of market acceptance of the higher pellet premiums for the third quarter, one North American producer said. "We might see a divergence with steel industries in various parts of the world moving at different paces," he added. Other market participants are also unsure if buyers are prepared for the jump in premiums. "We've had several complaints from customers in Europe," one trader in the region said.
A number of blast furnaces across Europe have been scheduled to come back on line in the second and third quarters, but the weak market has prompted some steelmakers to consider further closures or reductions in utilisation rates. Chinese crude steel output in January-April rose by 4.1pc on the year to 354.4mn t, but April production was 1.5pc lower than a year earlier at 92.6mn t. Crude steel output is expected to have fallen in May, with output by China Iron and Steel Association member mills of 2.246mn t/d for 11-20 May down by 0.2pc from 1-10 May owing to weaker demand and falling steel prices.
Related news posts
Japan's trading firms see metals prices cutting profits
Japan's trading firms see metals prices cutting profits
Tokyo, 2 May (Argus) — Major Japanese trading houses are expecting lower profits from their metals businesses during the April 2024-March 2025 fiscal year, mostly because of lower prices of commodities such as iron ore and coking coal . Japanese trading house Mitsui forecast profits for its metal and natural resource business falling by 14pc on the year to ¥290bn ($1.87bn) during 2024-25, primarily because of lower iron ore prices. Mitsui plans to cut iron ore output by 0.3pc on the year to 60.9mn t at its mining projects where the company owns production ri ghts or a production stake during 2024-25 . This includes the joint venture project Robe River in Australia with Australian iron ore producer Rio Tinto. Japanese trading house Sojitz also expects profits from its metal and natural resource business to decline to ¥35bn, down by 20pc on the year, mostly because of a bearish coking coal market. The company said its overall coal business can cut production costs during 2024-25, partly because it plans larger-scale output at the Gregory Crinum coking coal mine in Australia, without disclosing further details. But Sojitz said it cannot generate higher profits because of lower coking coal prices. The trading house expects the average coking coal price to fall to $230/t during 2024-25, according to the company's chief financial officer Makoto Shibuya, down by $57/t from a year earlier. The company reiterated that the price is not necessarily their selling price. Sumitomo expects profits from its natural resource business would remain flat at ¥72bn on the year, mostly as its nickel production in Madagascar recovers from the output cuts in 2023 , with an aim to produce 19,000t of nickel during 2024-25, up by 9.8pc on the year. A rebound in nickel production could offset possible losses from coal and coking coal prices falling to $266/t and $133/t respectively in the ordinary market, down by $21 and $9, according to the trading house. Sumitomo plans to increase coking coal production by 9.1pc to 1.2mn t but reduce coal output by 4.8pc to 4mn t during 2024-25. By Yusuke Maekawa Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Evion-Metachem Indian project starts producing graphite
Evion-Metachem Indian project starts producing graphite
Singapore, 2 May (Argus) — Australian graphite producer Evion's joint venture with Indian producer Metachem Manufacturing has produced and sold 700kg of expandable graphite, with more output planned in the coming months, after missing its timeline last year. Capacity of the expandable graphite plant, located at Kurkumbh near the west Indian city of Pune, will increase to at least 1,800 t/yr over the coming months, said Evion in its latest quarterly activity report. The agreement between the two firms originally envisioned 2,000-2,500 t/yr of production capacity in the first three years, with plans to begin an expansion to double the capacity starting from the second year. Evion previously was expecting first production in October-December 2023. Evion, formerly known as BlackEarth Minerals, back in 2021 signed an offtake deal with Austrian downstream graphite firm Grafitbergbau Kaiserberg for up to 2,500 t/yr of expandable graphite. Graphite concentrate for the plant is expected to come from external parties in the first two years of operations, subsequently switching to products from its Maniry graphite project in Madagascar, said Evion. Madagascar's national office for the environment is carrying out the environmental and social impact assessment for the Maniry project, according to Evion. India in July 2023 identified 30 critical minerals necessary to its green energy transition and energy self-reliance, including graphite. The country's mines ministry, through state trading firm MSTC, in March launched the second round of its auction , involving 18 blocks, for development of critical and strategic minerals in the country. By Joseph Ho Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US southbound barge demand falls off earlier than usual
US southbound barge demand falls off earlier than usual
Houston, 1 May (Argus) — Southbound barge rates in the US have fallen on unseasonably low demand because of increased competition in the international grain market. Rates for voyages down river have deteriorated to "unsustainable" levels, said American Commercial Barge Line. Southbound rates declined in April to an average tariff of 284pc across all rivers this April, according to the US Department of Agriculture (USDA), which is below breakeven levels for many barge carriers. Rates typically do not fall below a 300pc tariff until May or June. Southbound freight values for May are expected to hold steady or move lower, said sources this week. Southbound activity has increased recently because of the low rates, but not enough to push prices up. The US has already sold 84pc of its forecast corn exports and 89pc of forecast soybean exports with only five months left until the end of the corn and soybean marketing year, according to the USDA. US corn and soybean prices have come down since the beginning of the year in order to stay competitive with other origins. The USDA lowered its forecast for US soybean exports by 545,000t in its April report as soybeans from Brazil and Argentina were more competitively priced. US farmers are holding onto more of their harvest from last year because of low crop prices, curbing exports. Prompt CBOT corn futures averaged $435/bushel in April, down 34pc from April 2023. Weak southbound demand could last until fall when the US enters harvest season and exports ramp up southbound barge demand. Major agriculture-producing countries such as Argentina and Brazil are expected to export their grain harvest before the US. Brazil has finished planting corn on time . unlike last year. The US may face less competition from Brazil in the fall as a result. Carriers are tying up barges earlier than usual to avoid losses on southbound barge voyages. Carriers that have already parked their barges will take their time re-entering the market unless tariffs become profitable again. The carriers who remain on the river will gain more southbound market share and possibly more northbound spot interest. By Meghan Yoyotte and Eduardo Gonzalez Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US Fed signals rates likely to stay high for longer
US Fed signals rates likely to stay high for longer
Houston, 1 May (Argus) — Federal Reserve policymakers signaled they are likely to hold rates higher for longer until they are confident inflation is slowing "sustainably" towards the 2pc target. The Federal Open Market Committee (FOMC) held the federal funds target rate unchanged at a 23-year high of 5.25-5.5pc, for the sixth consecutive meeting. This followed 11 rate increases from March 2022 through July 2023 that amounted to the most aggressive hiking campaign in four decades. "We don't think it would be appropriate to dial back our restrictive policy stance until we've gained greater confidence that inflation is moving down sustainably," Fed chair Jerome Powell told a press conference after the meeting. "It appears it'll take longer to reach the point of confidence that rate cuts will be in scope." In a statement the FOMC cited a lack of further progress towards the committee's 2pc inflation objective in recent months as part of the decision to hold the rate steady. Despite this, the FOMC said the risks to achieving its employment and inflation goals "have moved toward better balance over the past year," shifting prior language that said the goals "are moving into better balance." The decision to keep rates steady was widely expected. CME's FedWatch tool, which tracks fed funds futures trading, had assigned a 99pc probability to the Fed holding rates steady today while giving 58pc odds of rate declines beginning at the 7 November meeting. In March, Fed policymakers had signaled they believed three quarter points cuts were likely this year. Inflation has ticked up lately after falling from four-decade highs in mid-2022. The consumer price index inched back up to an annual 3.5pc in March after reaching a recent low of 3pc in June 2023. The employment cost index edged up in the first quarter to the highest in a year. At the same time, job growth, wages and demand have remained resilient. The Fed also said it would begin slowing the pace of reducing its balance sheet of Treasuries and other notes in June, partly to avoid stress in money markets. By Bob Willis Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more