Brazilian mining firm Samarco, a joint venture between Brazilian miner Vale and Australian miner BHP, sees demand for high-grade iron ore pellet surging with numerous direct reduced iron capacity additions expected in the coming years.
Samarco market intelligence head Renato Hendrikson said at Wednesday’s Singapore Iron Ore Forum attended by Kallanish that the firm is investing to double its capacity of high-grade pellet from 2025, in line with market needs.
He opined that accelerated investments in DRI will add further pressure on pellet and pellet-feed supply, and high-quality ore supply tightness will likely persist over the next decade.
He also noted that the majority of global seaborne supply comes from low to mid-grade pellet sources.
Meanwhile, the decarbonisation movement will push DR pellet demand and naturally widen the pellet premium spread between blast furnace and DR grade pellets, Hendrikson observed.
According to him, DR grade pellets have historically traded at a premium of $9-10/tonne over BF pellets and the market already foresees an increase in the spread. However, the DR pellet premium has recently contracted relative to BF grade, despite no strong market fundamentals to justify this downturn.
The challenges faced in the industry to produce DR pellet include higher complexity, lower productivity, and higher cost. The DR pellet premium must justify this complexity, Hendrikson concluded.
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Very good overview of the weekly steel market.