Record pellet premiums bode well for iron exporters

Iron pellet premiums have hit an all-time high thanks to Chinese imports.

China has been reducing its domestic magnetite production in favour of imported pellets in part to reduce emissions and improve productivity.

The China blast furnace iron pellet premium (65 per cent) has seen a jump of $US3.30 ($4.60) per dry metric tonne (dmt) to $US87.50/dmt ($121.90/dmt).

This rise in crude steel output is in line with World Steel Association figures suggesting a Chinese and global trend, with year-on-year (YoY) steel production up 7.2 per cent in China and 5.8 per cent globally in July 2018.

The Chinese Government has set out ambitious carbon targets in a bid to lower climate changing emissions — it met its 2020 target three years ahead of schedule last year, cutting carbon dioxide emissions by 46 per cent.

According to a report from S&P Global Platts entitled SBB Steel Markets Daily, increasing coke prices in China have supported the demand for pellet, with large-size steelmakers “still buying seaborne pellet cargoes continuously”.

The increase in imports to Asian countries bodes well for Australian producers such as Carpentaria, which last month entered into an $86 million supply deal with Mitsui — one of Japan’s ‘big five’ sogo shosha (trading houses) — at the Hawsons iron project near Broken Hill, New South Wales.

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