Iron Ore Pellets Market

Global Industry Analysis (2018 - 2020) - Growth Trends and Market Forecast (2021 - 2026)

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Industry: Chemicals & Materials | Author Name: Harshad

Sales of Iron Ore Pellets Buoyant on Back of Flourishing Steelmaking Industry

Iron ore pellets, the backbone of steel industry, represent a steadily progressing multibillion dollar market. Rising ubiquity of steel consumption across myriads of end-use segments warrants a promising growth outlook of the global iron ore pellets market during the forecast period. Iron ore pellets tend to deliver superior functional outcome when compared to sinter, or lumps, which clears the way for them in the global market. The Chinese government has even imposed a policy framework against sintering activities, which is a strong factor contributing toward the growth of market. The demand for steel from the building and construction industry has been consistently proliferating in addition to the ascending consumption by the automotive industry. The exploding steel manufacturing business across fast-developing Asian economies like China, India, and Vietnam will particularly contribute heavily toward the expansion of iron ore pellets consumption volume in the near future. An increasing number of pelletising plants worldwide also plays a vital role in shaping the market in long run.

With tightening regulatory screws around sinter feed due to the associated environmental concerns, steelmaking has been witnessing a major shift in technological trends. The industry, as a result, continues to witness myriads of innovations in the process of iron ore pelletising. Moreover, steelmakers, and consumers have been facing the consequences of scarce availability of lump ores of desired quality, attributable to excessive mining activities. Iron ore pellets have thus gained the limelight as the only viable, and equivalent feed for direct reduced (DR) method plants. While the world of manufacturing came to an abrupt standstill amid the COVID-19 pandemic, although temporarily, iron ore pellets were among the most harshly hit global industrial sectors through 2020. The market however has been showcasing strong revival in 2021, with a majority of end-use sectors rebounding.

Iron Ore Pellets Market to See Greater Contribution from Growing Seaborne Trade

When it comes to analysing the trade scenario of iron ore pellets, captive consumption accounts for a majority of share – either in-house consumption, or shipping to steel manufacturing companies in the vicinity. Seaborne trade, on the other hand, is set to show impressive growth in the near future as the demand from non-integrated steelmakers has been on the rise recently. The size of this seaborne trade of iron ore pellets however depends completely on the iron ore pellet pricing across the various concerned regions. Blast furnace (BF) pellets currently account for more than half the global market share owing to its cost-effective attributes, and ready availability. However, iron ore pellets used in DR method have been emerging popular recently as a result of their dual cost benefit, i.e., lesser initial capital investments, and lower operating costs.

High Grade Iron Ore Profile Captures Spotlight in Line with Rising Sustainability Demands from Steel Industry

Besides the volatility of iron ore prices, ready availability of equivalent substitutes on the market at reasonable price points continues to account for limited market growth. The market for iron ore pellets has also been facing a major challenge to growth, especially across developed western regions, due to poor level of integration between iron ore pellets suppliers, and steelmaking companies. Carbon emissions, and the global sustainability drive are other major factor impacting the performance of iron ore pellets landscape. The steelmaking industry currently accounts for roughly 7% of the world’s total CO2 emissions, and thus it becomes imperative for participants to critically focus on their decarbonisation efforts on priority. While the industry is already witnessing innovations to enable sustainable steelmaking, the Paris agreement makes it necessary for the industry to bring down the carbon emission by a whopping 75%. This itself points to an opportunity in front of producers of premium/high grade iron ore as it allows drastically reduced emissions against conventional primary-route steel production processes.

The trend of carbonless steelmaking is prominently thriving across the North American, and European markets. Anglo American - the iron ore leader, has recently teamed up with Salzgitter – the German steel giant over the optimisation of the supply of high-grade iron ore for steel production with reduced emission (August, 2021). Metalloinvest Holding Co., the Russian behemoth in mining and steelmaking, recently made an announcement regarding its green steel credentials in the market. One of the top industry players, Cleveland-Cliffs also manufactures environmentally-friendly iron ore pellets that are further utilised in the making of sustainable steel.

China’s Primacy Prevails; Post-COVID-19 Recovery Crucial in Reshaping Regional Markets

Holding a massive share of more than half the global market volume, Asia Pacific reigns supreme in the global iron ore pellets landscape – led by China. The country’s voluminous steel manufacturing base alone contributes over 50% of the global production of crude steel, as indicated by the World Steel Association. China will most likely maintain its position at top spot because of faster post-COVID-19 recovery of most of its industries. India is particularly facing another challenge in form of the unprecedented hike in iron ore and iron ore pellet prices (July, 2021). Thousands of prominent secondary steel units from across the country, especially West Bengal, are thus opting for slimming down their production, or completely shuttering the businesses in response. The industry has been focusing on minimising dependence of such secondary steel units on the open market so as to recover the losses at the earliest.

Europe, the second leading market globally, continues to sustain on the back of consistently improving steel production. Demand from the automotive industry will also remain the key factor driving iron ore pellets consumption across European market. Germany is expected to remain dominant in the region with an added market value of its commitment toward minimum environmental footprint. On the other hand, North America that has been seeing a healthy growth trajectory so far is already witnessing a plunge in steel production in the wake of slashing demand coming from the key end-use industries like building and construction, and manufacturing. The COVID-19 pandemic has further aggravated the impact. The declining market is however likely to pick up slowly banking on the US government’s USD 2 trillion fiscal stimulus package. The Middle East & African region is also set to exhibit an attractive growth potential as the manufacturing industry is thriving, and the overall dependence on oil and gas industry has been reducing over the recent past.

Capacity Expansion, and Supply Agreements Preferred Growth Strategies among Market Leaders

The intensely competitive global market space continues to see pre-eminence of a chunk of multinational players that have their own iron ore mines, as well as state-of-the-art processing facilities. While this plays out as an impediment to the entry of potential new players, the overall market competition remains dynamic. Vale, followed by Rio Tinto, stand the world’s largest iron ore pellets producers, capturing a significant share in the global market. Key companies operating in the market maintain their primary focus on long-term supply agreements with leading steelmakers, with quality, and pricing the key differentiators. Besides capacity expansion, major players are involved in new launches in an effort to strengthen their hold on the market. Strategic partnerships, M&A, and JVs also prevail as preferred developmental moves. AK Steel Holdings Corporation’s acquisition by Cleveland-Cliffs Inc. (March, 2020) was intended to enable the latter to enhance its global footprint. Vale’s business expansion announced later in October, 2020 has the sole objective of expansion of its existing customer base. Rio Tinto also made an announcement regarding its plans to revise its iron ore pricing system in December, 2020. The revised pricing was specifically meant for the steelmaking ingredient.

Key Market Players in Global Iron Ore Pellets Landscape

Rio Tinto, Vale, BHP Billiton, Cleveland-Cliffs Inc., Fortescue Metals, United States Steel Corporation, Bahrain Steel, ArcelorMittal, NMDC Limited, LKAB, Mitsubishi Corporation RtM Japan Ltd (Subsidiary of Mitsubishi Corporation.), Iron Ore Company of Canada (Subsidiary of Rio Tinto), Metso Outotec, ArcelorMittal S.A., LKAB, KIOCL Limited, Jindal SAW Limited (JSL) (erstwhile SAW Pipes Ltd), SIMEC, Metalloinvest Management Company LLC, and Ferrexpo plc.

A majority of iron ore pellet producers from around the world that are currently struggling with the pace of demand, the steel industry anticipates pellet shortage that would last for quite a while. Vale (Brazil), the world's largest iron ore pellet producer and supplier has also been facing an aggravating storm that continues to hamper its iron ore and pellet strength over the past couple of years. The company’s the operational disruptions post-rupture of the Brumadinho tailings dam at the beginning of 2019 were further stretched by the massive plunge through 2020 due to the global COVID-19 pandemic. As a result, the company’s pallet output saw a dip of more than 24% in 2019 over that in 2018, which further fell by 30% in 2020. With mining exhibiting strong revival signs, the company expects to up its pellet feed production in 2021, and 2022.

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