Lump and pellet premiums expected to rise in July

SHANGHAI, Jul 6 (SMM) –In early June, Tangshan and Qinhuangdao (both in Hebei) ordered sinter plants to curtail production by 30-50% in an effort to fight air pollution. As such, some steel mills increased the proportion of lumps and pellets used in pig iron production. In addition, with the decline in the premium of pellets, the cost performance of pellets was better than that of lumps. And the price of coke stabilised after the previous sharp drop, thereby weakening the support for lumps. To sum up, lump premiums kept falling in June, while pellet premiums rose before falling.

Entering July, sinter production restrictions in Tangshan remained in place, and the supply of sinter has become increasingly tight. The overall demand for pellets and lumps is still strong. Due to intensive maintenance by pellet plants in July, the supply of domestic pellets may decline. The port inventory of imported pellets is not high, which may drive the premium of pellets to rise. While lumps remain somehow cost effective, frequent rainfalls in summer will lead to the problem of increased moisture for lumps, thereby making them less popular. The premiums of pellets and lumps are both expected to rise in July, but the upside room may be small.

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