Brazil's Vale raises silica content of flagship Carajas iron ore fines, keeps Fe stable

Brazilian miner Vale, one of the top producers of high grade iron ore globally, has announced an increase in silica content in its flagship Iron Ore Carajas fines, while keeping the iron content stable at 65% Fe, a company spokesperson said July 17.

Also known as IOCJ, the brand will maintain specifications of 1.4% for alumina and 0.07% for phosphorous, levels considered low in the industry. Silica content for the product has been adjusted from 2.2% to 2.7% the spokesperson told Platts, part of S&P Global Energy.

A gradual increase in IOCJ's silica content has been observed in spot, seaborne transactions for the brand since the start of the year, when it crept up to 2.12%-2.2% in February and March, data compiled by Platts showed.

Six subsequent spot IOCJ deals concluded over April-July saw expected silica content hover between 2.5% and 2.7%.

IOCJ is seen as a premium iron ore product due to its higher iron and lower alumina contents than the alternative Australian sinter feed materials. By keeping the expected iron and alumina contents unchanged, market participants said they expected limited impact on its usage in blast furnaces.

One Chinese steelmaker source said that, "assuming a desired sinter blend with silica content of 5.6-6%, the 0.5% silica adjustment in IOCJ would be minimal given it only makes up around 15% of a typical blending mix."

Other market sources also noted that the high-grade material could still receive support due to its lower levels of silica compared with medium-grade fines.

"The decision signifies a deterioration across iron ore fines in general but helps the miners to ensure stable production and shipment volumes," a north China-based steelmaker source said.

Platts assessed the 65%/62% Fe iron ore fines spread at $13.20/dmt on July 17, up from $10/dmt at the start of the month.

Higher silica across mainstream iron ores

The adjustment by Vale comes at a time where the market is coming to terms with higher silica contents in other major medium-grade fines.

Major Australian miners also lowered product specifications in recent months, with higher silica content across Rio Tinto's Pilbara Blend Fines and BHP's Mining Area C Fines, Jimblebar Fines and Newman High Grade Fines, Platts reported.

Following the adjustments, market sources said there would be a need to reassess discount levels for the impurity, given that Chinese coke prices are currently on an upward trajectory despite sitting around relatively low levels in recent months.

"Given all the changes to the recent mainstream brands have seen a higher silica impurity percentage, it would mean that the iron ore market will be forced to move towards either a higher tolerance for silica, or a stronger penalty for the high-silica cargoes," a China-based trader source said.

Platts assessed the per 1% silica differential for 60-63.5% Fe fines at 50 cent/dmt for the 3%-4.5% silica band, $1.15/dmt for the 4.5%-6.5% silica band and $2.85/dmt for the 6.5%-9% silica band on July 17.