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Chinese pellet premiums rise on pollution curbs

25 Oct 2017, 12.07 pm GMT

Chinese pellet premiums rise on pollution curbs

Singapore, 25 October (Argus) — Pellet premiums into China have risen to their highest levels this year, in the wake of output restrictions placed on pelletising plants in the largest steel production centre of Tangshan since 25 September.

Pelletising plants in the city have been asked to cut output by 50pc. This has sent traded levels for Indian pellet on a 64pc basis to 1,050-1,070 yuan/t at Tangshan and Jingtang ports. The seaborne equivalent price is $132-134/t cfr north China after port fees and a 17pc value-added tax are removed, or more than a $70/t premium to the Argus PCX 62pc fines portside index at $62.15/t cfr Qingdao today.

Floating seaborne offers for 64pc Indian pellet were at a $46/t premium to the 62pc index a month ago.

The restrictions will keep demand elevated above Yn1,000/t at Tangshan and Jingtang ports on a sustainable basis, several traders said.

"Some market participants did not expect enforcement of the restrictions to be so strict, but I do not think these hopes came true," a Hebei-based trader said. "The execution of environmental rules are getting more and more strict."

Tangshan has imposed other output cuts on sintering plants and coke batteries.

There are no similar output limits in Shandong, so portside pellet prices are lower at Yn950-960/t, or a seaborne equivalent of $119-120/t on a cfr basis.

Two vessels of Indian pellet on a 64pc basis traded at Yn1,050-1,070/t late last week, while a cargo of Indian pellet on a 64pc basis with an end-October laycan recently traded at $124/t cfr basis. "This is a reasonable price as it equals around Yn1000/t," a north China trader said.

Lump, the other direct charge iron ore product, has not seen the same uplift in prices as pellet. Participants expect lump premiums to fall this week. The marketable level for PB fines and PB lump combined cargoes is a 50-60¢/t premium for November delivery, with weaker lump demand dragging down the floating price, a Singapore trader said. "The lump price may come down a little further," he said.

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