New-added production capacity for iron ore pellets across China is squeezing the supply of domestic iron ore concentrates to steelmakers, with the result that concentrates prices have risen, market sources said on Monday. In China, domestic concentrates are largely used for pelletizing, Mysteel Global notes.
An official with an iron ore mining company in East China’s Shandong province with its own dedicated pelletizing plant perfectly encapsulated the trend. “This year our pellet capacity will increase by around 3 million tonnes from last year to reach 21 million tonnes/year,”he said. “The new pellet capacity does rely on our own concentrates resources,”he admitted. Also, within the first half of this year, another two large pelletizing plants began operations in North China’s Shanxi province, he pointed out, noting that one plant hosts 1.5 million tonnes/capacity and the other 1.2 million tonnes/year.
Last year, China’s pellet output is estimated to have reached some 175 million tonnes, higher by 11 million tonnes or 6.7% from 2018, as Mysteel Global reported, and within this year more new capacity will be added, a Shanghai-based analyst predicted. Just how much remains unclear but the volume will be substantial, he warned.
The reason that miners and individual pelletizing plants give for raising pellet capacity is that domestic steelmakers will gradually have increasing demand for pellet should use of their own sintering and pelletizing machines be restricted by local government authorities trying to reduce atmospheric pollution, the Shandong official explained.
In recent years city and provincial governments in China have frequently imposed production curbs on the facilities that steel mills operate when air quality deteriorates over urban areas. This year has so far been an exception. Such curbs have been rarely implemented in order to help the domestic economy recover after the severe impact of COVID-19, Mysteel Global understands.
Under these more relaxed conditions, most mills are able use their facilities including their own pelletizing machines freely so demand for concentrates has increased.
Meng Xiaofeng, director of the raw materials department of construction steelmaker- Shanxi Jianbang Group in North China, admitted his mill currently faces a dilemma. The steel works needs more concentrates rather than pellet at present, but in reality, local pellet availability is increasing while concentrates supplies are diminishing, he told delegates attending the 14th Mysteel International Iron Ore Market Seminar in Qingdao, East China’s Shandong province, on June 11.
Demand for concentrates has also strengthened because the mills see that smelting these offers them production-cost advantages compared with imported ores which are getting expensive, Mysteel Global noted. Also, some mills have beefed up their use of concentrates as a replacement for Brazilian Blend Fines from Vale – for their lower aluminum content – which has driven up demand for local concentrates too, as reported.
As a result of the tight supplies and high demand for concentrates, their prices have soared, with those for 66% concentrates in Tangshan, North China’s Hebei province, reaching Yuan 895/dmt ($126.3/dmt) EXW and including 13% VAT as of June 15, higher by a large Yuan 70/dmt or 8.5% on month, Mysteel’s database showed.
The prices of domestic pellet have also increased in tandem with the rise in prices of the raw material – concentrates, Mysteel Global noted. As of June 15, the price for 62% grade pellet in Tangshan’s Qian’an City rose to Yuan 1,055/dmt EXW and including VAT, up by Yuan 80/dmt or 8.2% on month, according to Mysteel’s database.
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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