https://www.argusmedia.com/en/news/2235145-brazil-iron-ore-pellet-supply-squeeze-drives-premiums

Brazil iron ore pellet supply squeeze drives premiums

The tightness in Brazilian pellets, typically alumina content of no more than 2pc, has gradually led to a supply squeeze of low-alumina pellet in China as well and has driven up premiums in the Chinese market. The Argus 64pc Fe 2pc Al cfr Qingdao assessment was at a premium of $18/dmt above Argus 64pc Fe 3pc Al cfr Qindao on 13 July, having widened from a premium of just $3.50/dmt a year earlier.

"Vale has decreased pellet supply sharply to Europe since last year, and I heard AF08 supplies to Japan and Korea in the second half of this year may be affected," a Singapore-based trader said. Some recent tightness in Brazilian pellet supplies to Japan has been noted by market participants.

"Vale's supply has been tight this year and we are making up the tonnages by sourcing pellets from other producers, availing different brand options from Vale and reducing our usage of pellets," a buyer said. Japan's iron ore imports from Brazil were down 2pc on year to 11.6mn t in January-May this year but May shipments saw a 48pc year on year rise.

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The supply limitations are reflected in rapidly rising pellet premiums. The quarterly Atlantic pellet premium was settled at $20/dmt to a 65pc Fe index for blast furnace grade and $24/dmt for direct reduced grade in the fourth quarter of last year.

Vale settled its third-quarter 2021 pellet premiums at $62/dmt to a 65pc Fe index for blast furnace grade and $70/dmt for direct reduction grade in June, around $10/dry metric tonne (dmt) higher than in the previous quarter. Vale-BHP joint venture Samarco and Switzerland-headquartered Ferrexpo subsequently settled at the same level.

"The pelletising concentrate supply from Itabira and Brucutu mines continue to be limited and pellet supply in the second quarter has not improved at all," a Shanghai-based trader said. "I don't think the problem can be solved in short term, and the tightness may remain in the third quarter or a while longer," he added.

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Can you guys imagine the premiums when pellets are wanted more and more

this is the stuff we're barely seeing, that we should be talking about/