A source from an integrated producer in Brazil told SteelOrbis that the premium for blast furnace grade pellets is now of $40/mt over the price of sinter feed fines, against a range of $31/mt to $33/mt over the last few weeks.
A second source confirmed the increase, but added that the higher premium applies to new contracts and spot sales only, as the lower premium applies to contracts.
According to the source, the higher premium was expected due to the stoppage of production at Samarco, following an accident at its mines in November 2015. Due to the dimension of the accident, Samarco is not expected to return to operation this year.
The source believes that with the higher price, the integrated steel producers will reduce the consumption of pellets, using more sinter feed fines and more lumps in the blast furnace charge. He added that in his view the impact will be more intense at the DRI plants, as the consumption of DRI grade pellets is mandatory in such plants.
In Brazil, for spot sales, sinter feed fines of 65 percent iron contents remain exported at $46/mt, lumps at $51/mt but pellet prices are now at $86/mt, FOB conditions.
In the domestic market, the price of sinter feed fines remains at $41/mt, lumps at $46/mt and pellets are now sold at $83/mt, also FOB conditions.
In July, Brazil exported 28.55 million mt of iron ore (pellets excluded), 5.1 percent more than in June, and 1.69 million mt of pellets, 8.9 percent less than in June. Most of the iron ore went to Asian countries, 21.86 million mt, of which 15.46 million mt to China. The main destinations of the pellets were the EU (512,100 mt), followed by Asia (487,800 mt) and Africa (325,500 mt).