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Hebei Based Steel Mill to Buy Indian Iron Ore Pellet Linked to Argus

Steel News - Published on Fri, 18 Oct 2019

Image Source: SG
Argus announced that a Hebei steel mill in north China has signed an initial agreement to buy Indian pellet indexed to Argus assessments. The India-origin pellet has alumina ranging between 2-3.4pc, shipped monthly in 55,000 tonnes parcels. The first cargo under the agreement will arrive in China at the end of October or early November. If testing is successful, the mill will buy 600,000 tonnes of pellet over a year priced against the average of Argus pellet indexes, 64pc Fe 2pc alumina pellet or 64pc Fe 3pc alumina pellet, both on a CFR Qingdao basis minus a discount.

This underscores the looser correlation between seaborne pellet and fines markets, as well as China's long-term shift toward pellet that avoids the pollution of sintering fines. The differential between pellet and mainstream 62pc fines prices has been volatile over the past year, making it difficult to index pellet contracts at a set differential to fines indexes. Increased volatility in the most liquid fines market, 62pc mainstream fines, has also complicated pellet contract negotiations.

When iron ore markets hit 2019 highs in early July, the Argus 64pc 3pc Al pellet index was at $138/dmt priced at a 10pc, or $12.80/dmt, premium to the Argus ICX fines index at $125.20/dmt. This marked a collapse of the pellet premium from a year ago when 3pc pellet at $143.75/dmt was priced at $69.20/dmt, or 93pc, above the Argus ICX at $74.55/dmt. Since July the differential has been volatile, with 62pc prices fluctuating between a high $80 and low to mid-$90/dmt, while pellet prices have slowly slipped towards $100/dmt. The 3pc pellet price yesterday at $103/dmt was at an 18pc, or $15.70/dmt premium, to the Argus ICX at $87.30/dmt.

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Posted By : Amom Remju on Fri, 18 Oct 2019
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