Brazilian mining firm Vale has settled fourth-quarter pellet premiums for blast furnace (BF)-grade pellet at $20/dry metric tonne (dmt) over a 65pc Fe index, while direct reduction (DR)-grade pellet has settled at $24/dmt.
The settlements for BF-grade pellet premiums are nearly flat with the previous quarter and lower by around $3/dmt for DR-grade pellets.
Quarterly pellet premium contracts are largely settled between Vale and their buyers outside China on a floating basis, with Chinese buyers mostly buying pellet supplies from the spot market on a fixed price basis.
European steel markets have started to show increases, lifting outlooks for pellet demand into one of its major markets. The Argus benchmark northwest European index increased by €4.25/t to €455/t ex-works on 3 September, while the Italian index nudged up by €0.75/t to €446/t ex-works.
Most market participants still expect the uptrend in European prices to continue, with some saying that the market could return to pre-Covid levels during September-October.
Japanese steel producers have hinted at an increased downstream performance later this year, although the country's iron ore imports fell by 19pc and coking coal imports dropped by 6pc during January-July.
China's appetite for pellet has started to pick up, following weeks of rising portside stocks of direct-charge materials weighing on prices. Demand received a boost from expected sintering restrictions in Hebei province this month ahead of the country's national day holiday over 1-8 October.
Pellet portside inventories fell for the second consecutive week to around 10.4mn t as of 28 August.
Indian pellet producers, whose products account for bulk of the spot pellet cargoes sold to China, have expressed concerns about the availability of their raw material supplies from the impact of Covid-19, monsoon rains and recently completed mine auctions. Concerns about Indian supplies have largely been brushed aside by Chinese participants because of robust portside stocks, but a recent increase in prices has again drawn attention to Indian supply outlooks.
