Iron ore’s costs in making steel in Europe have increased progressively in the past year and outpaced met coal costs further.

Iron ore prices in Europe have seen support from contracts linked to China’s import spot fines prices, which have surged to $118/dry mt CFR China this week, even with lower contract pellet and lump premiums.

A basket of iron ore products including fines, lump, and pellets needed to produce a ton of pig iron reached $178/dmt CFR Rotterdam basis in July, while input costs for met coke were just over $60/mt CFR Rotterdam basis.

This left a spread of almost $118/mt in favor of iron ore, and a pig iron cost of around $238.50/mt.

In July 2019, while the basket of iron ore prices to produce a ton of pig iron was higher at $209/dmt CFR Rotterdam, the spread with met coal was $115.50/mt.

Pig iron costs exceeded $300/mt a year ago, while steel prices were higher and stronger capacity utilization in Europe kept overall costs down.

Platts estimated European HRC steel mill spread with raw materials in July continued to track close to the 2020 low seen in June.