The ferrous complex went nuts yesterday, hitting the highest prices since 2011. Spot launched. Paper faded overnight. Steel firmed:
Yesterday’s major miner reports were actually pretty good so I’ll up this down to the general tumbling USD and revived risk bid.
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Vale is bringing back the volumes. The only question I have is why its sales were so low:
Vale’s pellet production totalled 6.3 Mt in 1Q21, 9.2% lower than in 1Q20, as a result of lower pellet feed availability from Vale’s sites mainly from Itabira and Brucutu. Despite a weaker quarter, Vale expects to gradually increase production during 2021 with the higher availability of pellet feed from Timbopeba and Vargem Grande.
Sales volumes of iron ore fines and pellets totalled 65.6 Mt in 1Q21, up 11%y/y on stronger iron ore production, but partially offset by lower pellet-feed availability. Iron ore price premium was US$ 8.3/t, as strong demand recovery from ex-China markets, higher coking coal prices in China and the need for elevated productivity in blast furnaces gave support to higher spreads between 65% Fe index and 62% Fe benchmark index and pellet premiums.
The pellet fall does not account for sales so far below production. Bloomie explained the gap as Vale restocking its blending hubs but I can’t find reference to that in any of the production collateral.
If it is restocking that has delayed sales, and that makes sense given Vale had to run down inventories with so much production offline, then it will pass soon enough and an additional 50mt of annualised sales volumes land on the market.
Or, Vale is playing silly buggers and hoarding stock. If so, prices will be higher for longer but then crash as demand comes off and Vale chases market share.
Time will tell!