Iron ore diversions weigh on cfr China pellet prices

High-grade iron ore pellet premiums into China fell this week, weighed down by increased Ukrainian and Russian supplies diverting from Europe.

Spot pellet premiums to the Argus ICX 62pc fines index fell by $1/dry metric tonne (dmt) to $28/dmt cfr China for Ukrainian 65pc Fe blast furnace pellet, according to an Argus survey of indicative levels. Premiums to the 65pc index fell by $4/dmt to $16-18/dmt cfr China. This fall is in line with lower fixed price indicative levels at around $115/dmt cfr China, which was $16.60/dmt higher than the Argus 65pc fines index at $98.40/dmt cfr Qingdao yesterday.

Two high-grade pellet cargoes sold in unconfirmed deals to a steel mill and trading firm last week.

Ukrainian pellet was offered at $28/dmt above 62pc index by a European seller this week, a Singapore-based trader said. He put the tradeable level at $17-18/dmt above 65pc index. An east China-based trader put the indicative level at $16/dmt above 65pc index.

"The European steel mill shutdowns will lead to more pellet cargoes shipping to the China market instead, and the pellet premium is expected to move down," another Singapore-based trader said.

Indicative levels for 63.5pc Fe, low-Al Russian pellet are around $108/dmt cfr China, although a cargo was sold at at an unconfirmed $104/dmt cfr China yesterday. It is unclear whether the Russian pellet deal is true "yet it can spread around, meaning it is also possible in the current environment", a Beijing-based trader said.

Chinese market participants expect weakness in European steel markets to shift 500,000t-600,000 t/month of high-grade Atlantic pellet to China. These increased supplies are also weighing on Indian pellet prices. The Argus 64pc Fe cfr China pellet indexes fell by $4/dmt this week to $110/dmt for 3pc Al and to $113/dmt for 2pc Al Indian pellet specifications. Prices for 64pc Fe, 3pc Al Indian pellet are expected to fall below this, participants said.

By Chris Newman, Kitty Xie and China staff

source: Argus Media