Russian steel group Severstal's iron ore pellet prices surge in Q1

21 April 2017

Russian steel and mining group Severstal said Thursday iron ore pellet sale prices averaged $86/mt in the first quarter, up from $36/mt in Q1 2016, while export sales were mainly directed to Europe and Middle East markets.

Severstal's Karelsky Okatysh mining unit sold pellets at $49/mt in Q4 2016, as prices gained over the previous year following global demand for alternatives to replace Samarco's idled 30.5 million mt/year pellet capacity in Brazil.

In Q1 2017, while benefiting from higher prices, Severstal said iron ore pellet sales increased 7% year on year to 2.58 million mt, with external sales up 16% at 1.34 million mt. Seasonal factors led overall iron ore pellet sales to fall 8% from the previous quarter.

Severstal's Q1 pellet export sales were split 72% to European customers, 23% to the Middle East and 5% to other destinations, the company said earlier.

US steel group Nucor expects to take a small amount of pellet from Severstal this year for its Louisiana DRI plant along with supplies from Vale, LKAB, Samarco and CAP Chile, a company presentation said earlier this month.

Blast furnace pellet premiums rose to $45/dry mt in January for high quality premiums supplied under long-term contracts, based on S&P Global Platts assessments, up from $36/dmt in December.

DR-grade pellet premiums rose to $54.50/dmt in January, from $46/dmt in December. Benchmark iron ore fines prices imported to China in Q1 2017 rose steeply year on year.

Severstal's Q1 2017 coking coal concentrate sales from the Vorkutaugol operation priced on average at $165/mt FOB. Mining costs were higher at $83/mt in the quarter, up from $79/mt in the previous quarter as fixed costs took their toll.

Volumes remain in decline, down 11% from the previous quarter at 710,000 mt as the miner cited the effect of scheduled long-wall repositioning at the Vorkutinskaya and Komsomolskaya mines. This followed a shutdown in Q1 2016.

After an explosion at the Severnaya mine, the deep mine site is being fully sealed off, and the company expects to begin extraction of Severnaya's remaining resources via the adjacent Komsomolskaya mine in 2020.