China iron ore pellet: Mill margins support prices

Seaborne pellet prices rose for the second straight week, as higher steel mill margins stoked demand for direct-charge material.

The Argus 64pc Fe, 3pc Al pellet was assessed at $109/dry metric tonne (dmt) this week, up by $1/dmt from last week. The 2pc Al was assessed at $112/dmt, also $1/dmt higher. The premium between 2pc and 3pc Al pellet was flat at $3/dmt.

Three deals emerged this week. A cargo of 55,000t of BRPL Indian pellet with early December loading dates was sold at $109/dmt today. A cargo of Rashmi Indian pellet for January delivery was sold at $109.50/dmt yesterday. An unconfirmed deal for three cargoes of 85,000t Vale AF08 pellet each for January, February and March delivery was done at MB65 index plus a $28.05/dmt premium.

Few cargoes were offered in the market. A cargo of BRPL Indian pellet for December loading was offered at $112/dmt, while two Indian pellet cargoes were offered at $110/dmt and $109.50/dmt.

Steel mills' firm margins and anticipation of sintering restrictions during winter are the two main drivers of pellet price gains. But prices may be pressured by slowing steel sales as cold weather takes hold in north China. Sintering restrictions this winter may be looser than the previous year, which could curb some demand for direct-charge material.

Indian pellet with 2.6pc Al was sold at 905-910 yuan/wet metric tonne, or a seaborne equivalent of $113.50-114/t, at Caofeidian port. A cargo of BRPL Indian pellet was offered at Yn930/wmt at Shandong and Caofeidian today, while JSPL Indian pellet was offered at Yn910/wmt in Jingtang port.