Following a one month consultation period
and from April 30, Fastmarkets will use its 65% Fe Brazilian Fines Index, cfr Qingdao (MBIOI-65-BZ) as the base price for its direct reduced (DR)-grade iron ore pellet premium Middle East reference.
Previously, Fastmarkets' 62% Fe Fines Index, cfr Qingdao (MBIOI-62) was used as the base price. The move follows a shift in the market to 65% Fe fines as the base price for some pellet contracts.
The DR-grade pellet premium is the additional value component that a DR-grade pellet commands after the iron value-in-use adjustment over an Fe fines benchmark has been made and freight adjustments have been applied.
Previously, the price that underpinned pellet contracts was the 62% Fe Fines, cfr Qingdao (MBIOI-62) but recently this has shifted to the 65% Fe Brazilian Fines, cfr Qingdao (MBIOI-65-BZ) because the base specifications of the higher-grade product more closely align with DR pellet products in the market. Fastmarkets intends to reflect this change with the amendment.
Direct reduction is a unique method of ironmaking that requires specific raw materials. In particular, the process necessitates the use of iron ore pellet that is higher in Fe and lower in gangue than can be used in a blast furnace. The cost associated with upgrading ore to a DR-grade level pellet and the relative rarity of suitable high-grade feedstock, accounts for this material obtaining a premium in the market.
This ‘premium’ component is negotiated between the buyer and seller and reflects the specific value of processing costs and supply and demand fundamentals associated with the higher Fe feedstock required for production. The premium is rounded to the nearest $0.50. The DR-grade iron ore pellet premium reference is a monthly figure published on the last working day of the month.
Fastmarkets will also change the publication time of the premium from 6.30pm Singapore time to 4pm UK time, to be more closely aligned with the Middle East. This change will also take effect from April 30.
Assessment: DR-grade Iron Ore Pellet Premium, US$ per dry metric tonne, Middle East Reference
Dimensions/quality: 94% of pellets < 9.0mm. Fe content, base 67.5%; silica, base 1.5%; alumina, base 0.5%
Quantity: Minimum 10,000 tonnes
Location: All origins, delivered to Middle East
Unit: US$ per dry metric tonne
Payment terms: Payment on sight, other terms normalized to base
Publication: Monthly. Last working day of the month, 4pm UK time
To provide feedback on this index or if you would like to provide price information by becoming a data submitter to this pellet premium, please contact Marina Shulga by email at: firstname.lastname@example.org. Please add the subject heading 'FAO: Marina Shulga, re: DR-grade pellet premium.'
To see all Fastmarkets’ pricing methodology and specification documents go to https://www.metalbulletin.com/prices/pricing-methodology.html