Analysis: Domestic steel mills use less sinter, lump ore, more pellets in 2017

SHANGHAI, Jan 25 (SMM)－Domestic steel mills used less sinter and lump ore, and more pellets in 2017, SMM research showed. Sinter and lump ore usage stood at 74.2% and 11.4%, down 0.5 and 0.3 percentage point respectively, on a yearly basis. Pellets accounted for 14.4%, up 0.9 percentage point on the year. On average, the iron content of iron ore at domestic mills inched up 0.5 percentage point to 57.9% Fe.

Sinter usage declined 0.5 percentage point on environmental concerns. Many mills mix high-quality fines in order to reduce pollution. As profit margins thin, mills are likely to use more sinter but this may exacerbate current environmental concerns.

Following a slight decline of 0.3 percentage point in 2017, usage of lump ore will inch up in 2018. Mills used less lump ore as premiums rose to $0.4275/dmtu and coke prices rose from Q4 2017. Lump ore usage is likely to pick up in 2018 as the price difference between PB fines and lump ore at port reached a low of 20-25 yuan/mt. 

Pellet usage is set to decline in 2018 as profits slip. Profits of rebar and hot-rolled coil of mills stood at 921 yuan/mt and 843 yuan/mt in 2017, up 830% and 38% respectively. This prompted steel mills to increase pellet use, thereby raising output of molten iron. A shortage of sinter due to winter production cuts also drove pellet usage.

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