With the growing DRI production and planned projects, especially in the GCC area, the issue of availability of high-grade DR pellets was among the most discussed topics during the Middle East Iron & Steel Conference (MEIS) held in Dubai this week.
DR capacity in the MENA region (excluding Iran) is expected to add 21-23 million mt in the coming two to three years if all major projects start operations in time, bringing the total capacity up to 55 million mt of DRI/HBI per annum, according to Kaushalendra Prasad, director of Star Global. As a result, demand for DR pellets in the MENA region is likely to reach as much as 85-90 million mt, while existing pellet capacities in the region are around 33 million mt, he added. This signals an expected supply shortage in the DR grade pellet market in the coming years and that the market will require both local production and imports.
To cover additional needs of 30-40 million mt of DR pellets, according to Mr. Prasad, global pellet suppliers are working on increasing capacities. Renato Hendriksen, head of strategic marketing at Brazilian mining company Samarco, said during the pellet panel discussion that Samarco’s plan to reach 26 million mt of pellet production in 2028, from the 15-16 million mt output expected for 2025, is ongoing.
But despite the favorable environment, pellet producers are facing a lot of challenges, and panelists at MEIS agreed that iron ore type and quality are among the major ones. Renato Hendriksen from Samarco said that with changing pits now more and more companies are facing the need to beneficiate ore with 40-45 percent Fe to the base 67 percent Fe pellet feed fines, while it was up to 60 percent Fe in raw iron ore mined earlier. “High grade ore resources are exhausted, so beneficiation is more important and converting 40 percent Fe fines to 65 percent became a new normal,” Prasad said.
Another challenge is logistics. Sergio Espeschit, dealing with strategic business development at Brazilian miner Bemisa Holding, mentioned that logistics costs sometimes are bigger than mining costs as “we do not choose where the ore is”. Bemisa Holding, which produces 3.5 million mt of high grade pellet feed per year, is going to start its new mine to expand capacity (up to 15 million mt potentially of pellet feed with 70.4 percent of iron content) in late 2028-early 2029.
Licences and water supply are among other challenges pellet producers are facing in Brazil. “After the accident at Samarco people are afraid, and water is still a bit problem,” Renato Hendriksen commented.
A part of pellet demand in the MENA region is expected to be covered by local producers as “Suez [Steel in Egypt] and Tosyali have plans for their own pellet plants.” In any case, until 2030, the DR pellet market is expected to remain in short supply and most material is expected to come from existing producers, like Vale, amid the high importance of the quality of the material required for green steel production.
Strong interest was shown in the presentation of the Simandou project, which was recently launched with the initial capacity of 30 million mt. “This will definitely increase supply of 65 percent Fe ore to the market, and I don’t believe that prices will remain unaffected. But, again, this will be used for BF pellet production, not DR,” a market source on the sidelines of the conference told SteelOrbis.
At the moment, the DR pellet market has sufficient supply and, with a lot of negative factors like low demand and pressure on margins this year, pellet premiums have been down in the second half of 2025. In particular, DR pellet premiums were at $44/mt and $48/mt in Q1 and Q2 respectively, but fell to $38/mt in both Q3 and Q4.