Chinese mills lift iron ore pellet ratio in blast furnaces

China's steel mills are lifting the consumption ratio of iron ore pellet in their blast furnaces to compensate for lower volumes of iron ore lumps and sintered ore, new data suggests. As of September 22, the 64 mills surveyed regularly by Mysteel had raised the proportion of pellets in their furnace feedstocks by another 0.49 percentage point on fortnight to reach 17.5% - the highest since the end of January.

Consequently, over the two weeks to September 22 the average ratio of lumps in the mills' melts remained low at 11.19%, though inching up by 0.14 percentage point on fortnight. On the other hand, the steelmakers' use of sintered ore in their furnaces declined further by 0.62 percentage point to 71.31%, the findings showed.

"Many steel mills have been consuming more pellets in their furnaces recently, considering the overall raw materials cost, as the rather high coke prices have dulled the keenness of mills to consume iron ore lumps," a Shandong-based iron ore trader in East China remarked.

A Shanghai-based market watcher also mentioned that many steel mills' sintering operations have been restrained amid the recent large-scale production curtailment campaign.

Iron ore pellets, lumps and sintered ore are substitutes for each other in blast furnaces, but lumps fed into furnaces require more coke to be consumed than do sintered iron ore feeds and pellets, Mysteel Global notes.

As of September 27, China's national composite coke price under Mysteel's assessment still stood at a rather high level of Yuan 3,978.2/tonne ($616/t) including 13% VAT.

Partially due to the relatively firm demand for pellets and the reduction in supplies from India recently, pellet prices have performed more strongly than those of other ore products, a Shanghai-based iron ore trader said. Mysteel's 63% Fe iron ore pellet premium against 62% Fe Australian fines had recovered to $26.65/dmt as of September 27, up $6.45/dmt on month.

On the same day, Mysteel's 62.5% Fe iron ore lump premium against 62% Fe Australian fines had dropped to $0.0265/dmtu, the lowest since April 24 2017, or down 0.0635/dmtu on month. And the Mysteel SEADEX 62% Fe Australian Fines index stood at $118/dmt CFR Qingdao, down $39/dmt on month.

As of September 23, iron ore pellet stocks at China's 45 ports had dipped to 3.87 million tonnes, the lowest since August 5, according to Mysteel's assessment.

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