DR grade iron ore pellet supplies tightening: IIMA

Global supplies of direct-reduced grade (DR) iron ore pellet may remain tight and constrain production of direct-reduced iron (DRI), with a supply shortfall expected from the closure of some iron ore mines by Brazlian mining firm Vale.

Demand for DR grade pellet may increase by 8.6mn t during 2018-20, while supplies of such pellet by the largest supplier Vale may fall by 2.5mn t over this period, according to the International Iron Metallics Association (IIMA). Global demand for DR grade pellet is expected to touch 49.4mn t in 2020 compared with 40.8mn t in 2018.

Before the 25 January tailings dam collapse at Vale's Feijao mine, IIMA had forecast Vale's total DR grade pellet supplies in 2019 and 2020 at around 27mn t each year, roughly 45pc of the company's total pellet sales volumes.

DR grade pellet has a typical Fe content above 66pc, higher than Fe content of blast furnace grade pellet. DRI is a highly pure form of iron, which is often used as a feedstock along with steel scrap to produce steel in the electric arc furnace.

IIMA forecasts DR grade pellet supplies from Sweden's LKAB to increase by a maximum of 500,000t by 2020. Canada's IOC is projected to increase supplies to 3.7mn t in 2019 from 1.7mn t in 2018, while sales in 2020 could increase by another 500,000-800,000t. IOC's pellet shipments fell sharply in 2018 because of a prolonged strike at its facilities in Canada.

The association also sees Vale-BHP's joint-venture Samarco mining complex in Brazil, a key pellet producer before it was shut down after another tailings dam accident in November 2015, to resume operations in the third or fourth quarter of 2020, contributing at most a few thousand tonnes of pellet up to 2020.

DR pellet production increases are also projected at Bahrain Steel and Tosyali Algeria.