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Bahrain Steel in 20-year iron ore pellet feed deal with Anglo American

London — Pellet producer Bahrain Steel BSC has signed a 20-year deal worth around $15 billion with Anglo American Marketing for the supply of iron ore.

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Anglo will supply up to 8 million mt/year of pellet feed, providing Bahrain Steel's two production lines in Hidd with around 60% of their expected needs based on annual rated total capacity of 12 million mt/year of pellets.

The agreement, which built on a prior deal dating back to 2012, specifies iron ore supplied at a minimum 67% Fe and 2% or less total gangue, a company statement said.

"Deliveries under the contract have already started, sourced exclusively from Anglo American's Minas-Rio mine in Brazil," Bahrain Steel said.

Bahrain Steel said it has an estimated 26% share of the iron ore pellet market in Gulf Cooperation Council (GCC) countries, where demand was estimated at around 22 million mt/year and growing.

Bahrain Steel Chairman Khalid Al Bassam said the deal with Anglo American "will provide important safeguards to the pellet feed supply required to serve the needs of our customers in the MENA region and beyond, which are increasingly relying on Bahrain Steel for their supply of DR pellets."

Bahrain Steel said it had been in talks with Anglo American since May 2018 to agree the new supply agreement, which replaced an earlier agreement from 2012.

The Anglo feed will enable Bahrain Steel to produce high grade DR pellets with over 67% Fe with combined silica and alumina levels of less than 2.5% and BF pellets of 65% Fe with combined silica and alumina levels of 3.5%, CEO Dilip George said in a statement.

"Furthermore, with Anglo American now providing nearly 60% of our needed iron ore feedstock, we are significantly cutting the number of different ore types used to produce our pellets, which will result in improved efficiency and production," George said.

Bahrain Steel will be able to make several grades of pellets, sourcing additional pellet feed with fine sizing and grinding concentrates and other high grade iron ores as needed to optimize final pellet quality and production levels. Bahrain Steel supplies pelts to customers as well as to sister company SULLB's DRI plant, located at the same industrial site in Bahrain

Anglo American's Minas-Rio mine in Brazil's Minas Gerais state was expected to produce 18 million-20 million mt in 2019 as it continues to ramp up to design capacity of 26.5 million mt/year.

Bahrain Steel, which sources iron ore from Brazil, Canada, Chile and Sweden, also bought pellet feed from Mexico and Turkey last year.

-- Hector Forster, hector.forster@spglobal.com

-- Edited by Dan Lalor, daniel.lalor@spglobal.com