Oman imported 197,500 MT Iron Pellet from India in FY14

Jindal Shadeed Iron & Steel, located in Sohar industrial port area of Oman and having a 1.5 MnT pa HBI making capacity, has imported 197,500 MT Iron Pellet from India in FY14, according to SteelMint Research.  

Source: SteelMInt Research

Shadeed has started blending different grades of DR Pellets based on their Fe content to facilitate standard metallization property in HBI. This eventually refrains from reliance resting on a single supplier as well as to optimize the cost of Pellets.

In continuance to the above, Shaheed started procuring Fe 63.5 BF grade Pellets from its group company JSPL, August, 2013 onward, for blending.

Import from India may probably mount in FY15

JSPL have 4.5 MnT pa Pellet plant in Barbil, Odisha and it is projecting to commission additional 4 MnT pa plant in Apr‘14. Pellet supply will rise in Indian domestic market squeezing its own prices. Also, non viability in export over feeble spot Iron ore prices in China and 5% duty imposed by Indian government may as well thrust supplies to Oman.

Perhaps, this scenario indicates increasing Pellet import in Oman from India in FY15.

Shaheed imports over 90% Pellet from Vale & Bahrain Steel

Shaheed, the only HBI plant in Oman is using 100% imported Pellets, which is the principal feed raw material. The plant was commissioned on 5 Dec, 2010 and has attained rated capacity of 1.5 MnT pa in 2014.

The company procures more than 90% Iron Pellets from Sohar based Vale on CFR basis & from Bahrain situated Bahrain Steel on FOB basis.

Iron bearing material like Iron ore & Pellets are imported to Oman as there is no Iron ore available here. Pellet Premium from Vale for Fe 67.7 DR grade Pellet is at USD 44/MT. Vale is procuring Pellet feed from captive Iron ore mines in Brazil and it is roughly producing about 8 MnT pa Pellet. It is supplying about 0.9 MnT pa Pellet to Shaheed. 

Bahrain Steel is charging USD 42/MT as premium for Fe 66.2 DR grade Pellet and manufactures about 5 MnT pa Pellet. Fe 66.5/66.6 Pellet was also purchased from Bahrain previously. It has been understood that Bahrain Steel is in dialogue with Brazilian miners for securing long term Pellet feed; might start procuring Q3 FY14 onward.

Strong Reasons stated by SteelMint influencing International Pellet Prices

• Price volatility of Fe 62 Iron ore fines on CFR China port basis

• Current mines in Brazil & Australia are nearing the end of their economical production and mining firms are developing new mines and beneficiation plants, infusing huge finance. This demand-supply picture affects the price of fines

• Freight element prevalent in the market corridors in which numerous Iron ore shipments are taking place

• Chinese stock of Iron ore fines at Chinese ports i.e. higher the stocks, less is the transport of fines to China and hence, lesser will be the CFR China Iron ore price

• Pellet premium benchmarks which are set at the beginning of the year based on long term contract finalization by Japanese & Chinese companies; landed cost of Pellet may fluctuate with distinct shipments over Chinese Iron ore price alteration albeit fixed premiums

• Greater demand for DR Pellets as more and more Steel companies have started to use Pellets in their feed and re-distribution of usage between BF Pellets and DR Pellets world over

Shaheed HBI possibly will be restricted to captive use

Shadeed is building 2 MnT pa Steel Melting Shop which is predicted to be commissioned in Apr’14. There is high growth industrial and infrastructure building projects in MENA region.

Hence, HBI produced at present could be restricted to captive consumption in the EAF for conversion into Steel, thereby value adding the HBI. HBI being produced is now exported in GCC region, India, Europe and China.

Shadeed has also started a new Rolling Mill project at the same location. This plant is likely to be commissioned by Q3 FY15.

Why new HBI Expansion Plan aren’t building up in Oman?

Various cost elements which dictate the FOB Price of producing HBI in Oman are DR/BF Pellets, natural gas, electricity and water.

Inadequate availability of natural gas in Oman as of now and its pricing rigorously under government control is a menace for new DRI capacity. Electricity is another factor, as gas based plants are producing electricity under strict government control.

Finally, water is comparatively pricey. Primarily, these are industrial water production plants. Thus, natural water sources are scarce and lot of money is invested in the desalination plants.