China's Pellet Capacity to Increase Sharply in the Next Couple of Years

China is about to receive a large boost to iron ore pellet capacity over the coming two years, with as much as 60-70 MnT pa to be constructed and commissioned within the next two years, according to Mysteel's finalized survey results on the domestic pellet industry published last Friday. The additional capacity is to meet the anticipated gradual increase in demand for pellet from domestic steel mills.

The survey was conducted last Dec among over 50 individual pelletizing firms nationwide, with the preliminary findings announced by Liu Xiaoliang, Mysteel's senior analyst for the domestic iron ore industry, at the Mysteel Bulk Commodities Week 2020 Iron Ore Seminar in Shanghai last Dec 13.

According to Liu, in the context of increasing concerns about atmospheric pollution being expressed by the central and local governments, simply comparing the flue gas produced by sintering ores and producing pellets, raising the consumption of pellet and reducing that of sintered ores is an inevitable trend for the future across China.

China's pellet output has steadily increased since 2017, with production estimated to have reached about 175 MnT last year, up by another 11 MnT or 6.7% on year, according to Liu.

Moreover, another bi-weekly Mysteel survey showed the ratio of pellet feeds in blast furnaces among 64 Chinese mills hit a high of 16.67% as of Dec 25, a record since Mysteel launched the survey in Jul'14. Pellet's share of furnace feeds had continued to grow for a sixth consecutive survey period, rising by another 1.05 percentage point on a fortnight.

The increase was mainly due to Chinese steel mills consuming more pellet to replace sintered ores and lumps. The mills say pellet is more cost effective and promises higher productivity amid the frequent curbing on their production facilities including blast furnaces, as Mysteel Global has reported.

An official with a Shanxi-based steelmaker in North China agreed that the ratio of pellet in blast furnaces will gradually increase definitely, as pellets are more eco-friendly. China will have new capacities for pellet, he was certain, disclosing that a new pelletizing plant with 1.5 MnT pa capacity near his mill has been brought on stream in the second half of 2019.

Meanwhile, the price for domestic pellet was generally stable in 2019. Pellet prices have not fluctuated to the same degree prices of domestic iron ore concentrates, a sales official with a Chengde-based pelletizing firm in North China's Hebei province said.

As of Jan 7, the offer price for 62% grade pellet in Chengde at Yuan 940/dmt ($145.2/dmt) EXW and including 13% VAT, up by 1.1% on month and 3.9% higher on year, Mysteel's database showed.

Mysteel's survey also noted that the new capacity for pellet will drive up the demand for domestic concentrates for pelletizing. It showed that in the next three to five years, more than 30 large-scale iron ore projects will be under construction and put into operation, for an additional capacity of 65-75 MnT pa.

In 2020, China's iron ore concentrates output will continue to increase by another 11 MnT or 4.1% on year to 280 MnT, according to Mysteel's prediction basing on the survey among the 332 domestic mining companies, as reported.

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.