Domestic, imported pellets less popular with China mills
“This is a hard time for both domestic and imported pellet,” admitted an official with a Shandong-based miner with its own pelletizing plant. The East China firm was planning to expand pellet capacity this year in expectation of concerns about environmental protection lifting demand for pellet higher.
“We had expected that this year's production restrictions to help control pollution would remain strict, but so far, this has not been the case,” he said, pointing out that after the curbs imposed by local governments to fight winter smog were lifted in March especially in North and East China, steel mills are still using pelletizing and sintering machines freely. This is despite the fact that these two kinds of facilities are recognized as being more polluting than other steel industry processes, Mysteel Global notes.
Consequently, prices of domestic pellet have declined largely, with the price for 63% grade pellet in Shandong’s Yishui, for example, reaching Yuan 1,050/dmt ($148.4/dmt) EXW and including 13% VAT as of April 28, down by 1.9% on week and 4.1% on month, Mysteel’s database showed.
A trader in Shandong importing iron ore agreed that steelmakers with their own pelletizing machines are all producing by themselves, with the result that sales of pellet at ports are languishing and stocks are accumulating. He noted too that some mills in inland cities without the capacity to make their own pellet are comfortable buying domestic pellet - given the short distances the feeds need for transporting - which is reducing demand for imported pellet further.
Mysteel’s weekly survey over April 17-23 showed that inventories of imported pellet at China’s 45 major ports had reached a four-month high of 5.5 million tonnes, up 2.6% on week (gaining for a fourth week) and by 22.2% on month. By comparison, the total of imported iron ore stocked at these ports reached 115.85 million tonnes as of April 23, down by 0.43% on week and 0.9% on month.
Prices of imported pellet have dropped too, with those of 63% grade Ukrainian pellet off 0.6% on week and by 4.4% on month to a two-month low of Yuan 945/wmt FOT at Shandong’s Rizhao port as of April 28, according to Mysteel’s data. On the other hand, the price for 62% PB fines at the same port was more stable, dipping by 1.1% on week and 0.9% on month to Yuan 645/wmt FOT as of the same day. The two prices include the 13% VAT.
Moreover, notwithstanding the freedom that those mills with pellet machines have currently to make their own feeds, most steelmakers are still reluctant to buy high-priced, high Fe-content ore to make pellet for now. This is because the spread of COVID-19 over January-February disrupted demand for finished steel, so mills are not seeking high productivity in their steel shops currently, as reported.
Written by Zhiyao Li, lizy@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com
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