China's Pellet Feed in Blast Furnaces at Multi-Year High

Over December 12-25, the ratio of pellets feeds in blast furnaces among 64 surveyed steelmakers across China hit its new high of 16.67% since Mysteel launched the survey in July 2014, or up another 1.05 percentage point on a fortnight, according to Mysteel's latest bi-weekly survey.

The ratio had been on the rise for the sixth consecutive survey period, as Chinese steel mills have been consuming more iron ore pellets to replace fines because of its cost effectiveness and productivity amid the frequent curbing on their production facilities including blast furnaces, market source shared the observation on December 27.

The added volume was mainly to replace fines in the blast furnaces as the ratio of fines feeds down to 71.71% as of December 25, dipping 1.1 percentage point on fortnight.

Over the same time, the ratio of lumps in blast furnaces at these mills was at 11.63%, or up by a tiny 0.06 percentage point over the two weeks, according to Mysteel's latest survey.

An official from a steel mill in Anhui of East China confirmed that they had been using more pellets, both domestically-produced and imported, than imported lumps, as the former was more cost-effective.

As of December 27, the price of the 65% grade Ukrainian pellet was assessed at Yuan 895/wmt ($128/wmt) FOT Rizhao port, Shandong of East China, up 2.3% on fortnight, that of the 62.5% grade PB lumps was assessed at Yuan 833/wmt with same pricing terms, up 0.4% higher over two weeks, both being more competitive in pricing than the 61.5% PB fines, down by 2.1% on fortnight, according to Mysteel's data.

An iron ore trader from Shandong of East China noted that pellets stocks at Chinese ports had been declining at a faster pace than lumps, and traders with pellets stocks had been holding onto their offering prices.

"Indeed, frequent curbing tends to increase the demand for lumps and pellets, and the better consumption of lumps just emerged recently, while pellets have been popular for a while," he said.

As of December 26, imported pellet stocks the 45 Chinese major ports under Mysteel's survey fell 11.9% on week to 5.05 million tonnes, and lump down 4.1% on week to 18.1 million tonnes, Mysteel's database showed.

Governments in several provinces and cities in key steelmaking areas in North and East China had imposed a few rounds of restrictions since November and the latest having been since December 18 because of air pollution, and Tangshan was among the first to abandon the curbing on December 26, as reported. Such restrictions tend to be frequent for the coming months until around March when winter is about to end in China.

Other than cost effectiveness against lump, a Shanghai-based market watcher added that higher coke prices also directed Chinese steel mills towards pellets from lumps as they will need more coke to burn lumps in blast furnace than pellets.

On noting the gaining popularity of pellets and lump in the Chinese market, the Australian miner Fortescue Metals Group reduced its discount for long-term Fortescue Lump contract supplies to 8% for January 2020 from the 10% for December 2019, while it enlarged the discount for fines such as Super Special Fines (SSF) to 18% from 15%, as reported.

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