Pellets Remain Popular Among Chinese Steel Mills

China's steel mills have gradually used more iron ore pellets in their furnaces, both for imported and domestically-produced supplies, as the steel producers strived to maintain steel output amid the restrictions when steel margin remained high, according to market sources.

Over November 14-27, the ratio of pellets feeds in blast furnaces among the 64 Chinese steel mills under Mysteel's survey averaged 15.55%, at a new high since October 16 or up further 0.13 percentage point on a fortnight, according to Mysteel's latest bi-weekly survey. While that of lumps in blast furnaces at the mills dipped to 11.97% at the same time, down by another 0.38 percentage point over two weeks. The rest ores in the blast furnaces are sintered ores, Mysteel Global understands.

Since late September, many regional authorities across China imposed several rounds of emergency curbs among heavy-polluting industrial enterprises including steelmakers amid poor air quality forecasts, with all the key steelmaking provinces included and facilities such as blast furnaces, sintering, pelleting and lime kiln operations being affected, as Mysteel Global reported.

"Such restrictions have pumped up steel mills' demand for pellets and lumps to replace sintered ores," a market source in Shanghai explained.

"Besides, the steel price rebound since mid-November until the last couple of days in November has enabled steel mills to consume higher grade ores including pellets and lumps for higher productivity," she added.

Mysteel's national average price for HRB400 20mm dia rebar reached Yuan 4,178/tonne ($594.4/t) including the 13% VAT as of November 27, up by a large Yuan 260/t or 6.6% on month.

During the period, steel mills in Tangshan, North China's Hebei province, had been running their pelletizing facilities at the high rates whenever possible as it was more economical compared with direct consumption of imported pellets, a local source said.

Hebei is China's largest ore-producing region and having quite a number of pelletizing plants as independent operations or affiliated to local steel mills, Mysteel Global understands.

At the same time, a Shandong-based trader in East China also noted the popularity of imported pellets at the ports, as reflected in the higher number of deals concluded for such cargoes. As of November 28, pellets stocks at China's 45 major ports, accordingly, fell 1 million tonnes or 13.9% from 7.5 million tonnes on October 31 to 6.4 million tonnes, despite the overall iron ore port inventories down by 2.7 million tonnes or 2.1% to 123.8 million tonnes during the same period.

Compared with pellets, lumps were lacking the overall cost competitiveness in that extra coke will be consumed to burn lumps in blast furnace than pellets. As of November 27, price for 65% grade Ukrainian pellet was Yuan 828/wmt FOT Shandong's Rizhao, while that for 62.5% grade PB lumps was Yuan 805/wmt at the same time and in the same region, Mysteel's data showed. The two prices include 13% VAT.

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