Direct reduction (DR) pellet premiums moved lower for September as participants looked to factor into contract pricing talks weaker overall pellet demand and DRI growth prospects in the Middle East for the current year.
Estimated premiums for September cargoes fell to $39.50/dry mt, down $1.50/dmt from $41/dmt in August as a resumption in discussions starting after Ramadan and the summer break looked to finalize terms.
Previous provisional prices in the $40-41/dmt range gave way to downward pressure on supplier offers that had been in the mid $40s/dmt.
Lower gas availability in Egypt and regional unrest in parts of the Middle East and North Africa coupled with competitive steel imports led by China and from the Commonwealth of Independent States trimmed potential growth.
Low oil prices this year dampening steel-related investments was negative for DRI output and the price outlook.
Increased availability of pellets from Brazil and Oman, as well as Bahrain and India, followed premium erosion from a high of around $48/dmt signed for 2014.
Some later 2014 contracts, running through Q1 2015, were heard nearer the $42/dmt mark.
Latest premium talks in the Middle East had moved prices in from a bid offer range cited at $35-45/dmt to likely nearer the bid, according to several buyers and other industry sources.
Producers are more optimistic that for the highest grade products they may be able to secure higher overall prices.
Some buyers are understood to be paying additional Fe on top of the premium and 65% Fe fines reference.
A multitude of different pricing systems made the premium hard to standardize or provide strong relevance currently, said one source.
The market is using Platts IODEX 62% fines and adjusting to 65% Fe iron content in many cases, with further adjustments for iron content to the pellet grade being stipulated in some earlier talks.
An earlier attempt to move to using 65% Fe indexes has not yet been confirmed, with producer momentum weakening as demand fell.
Producers state that a circa $40/mt and under DR premium basis IODEX adjusted to 65% Fe was on the low side and there may be higher prices and pricing differentiation sought for some contracts.
Source : Platts
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