September 2021
DR pellet is essential for producing direct reduced iron (DRI) which is a highly pure form of iron, and is often used as a feedstock along with steel scrap to produce steel in the electric arc furnace (EAF). DR pellet has a typical Fe content above 66%, higher than is typical of blast furnace (BF) pellets.

Annual DR pellet production has reached 100Mt for the third consecutive year. In 2020, the production was 122Mt, despite the impact of the Covid-19 pandemic. AME forecasts that DR pellet production will reach 143Mt in 2025 at a CAGR of 3.2%.



DR pellets are primarily produced in four regions of the world: North and South America, Europe and the Middle East. However, the presence of DRI plants limits the availability of pellets for merchant trade outside the countries or regions where they are produced. AME estimates that only ~36Mt of DR pellet was produced for the seaborne market in 2020, and this will increase to 52Mt in 2025.

Brazil, Oman, Sweden, Bahrain, and Canada are major DR pellet export countries, accounting for more than 90% of the global DR pellet seaborne market.




Vale is the largest DR pellet export company in the world. It exported ~8.2 Mt of DR pellet in 2020. In recent years, Vale has been subject a series of disasters due to dam failures resulting pellet plant shutdowns. In November 2015, the failure of Fundão tailings dam led to the shutdown of the Samarco pellet plant. Samarco historically has been the Brazilian iron ore producer most closely identified with DR pellets. Fundão tailings dam ruptured in January 2019, and Vale has idled the Fabrica, Vargem Grande and Tubarão I and II pellet plants.

Samarco started shipping DR iron ore pellet products from March 2021. The market in terms of both pricing and demand for DR grade pellets is favourable for the restart, and their return has been eagerly awaited by end users who have been forced to substitute lower quality pellets and lumps in order to maintain DRI output. Samarco will initially ramp up to 7Mtpa of pellets, which will include around 4Mtpa of DR grade pellets, ramping up to 14Mtpa in the second half of the decade. Tailings disposal is the limiting factor in ramping up production at a faster rate.



DR pellet is produced by Vale’s Sohar pellet plant with a total of capacity of 9.2Mtpa. However, the plant only produced 7.6Mt of DR pellet in 2020, down 17.5%, mainly due to lower availability of pellet feed. The major customers are from Middle East countries.



LKAB has a total of 10Mtpa capacity at Kiruna KK3 and KK4 pellet plants. KK3 produces only DR pellet, and KK4 can switch between BF and DR pellet. Based on its contract portfolio, it seems that about 7Mtpa is the maximum level of seaborne DR grade pellet supply for the foreseeable future. The major customers are from Middle East countries.



Bahrain Steel has two pellet lines with a total production capacity of 11Mtpa, and production at the 12Mtpa level has been achieved on sustainable basis. Bahrain Steel imported ~8Mtpa of iron ore in 2020, mainly from Brazil, Canada, and Sweden, to produce~8.3Mtpa DR pellet, of which ~6Mtpa was supplied to seaborne DR markets and the balance of ~2Mtpa was fed to the company’s own DR plant SULB which produces 1.5Mtpa DRI.

In 2019, Bahrain Steel signed a 20-year iron ore pellet feed contract with Anglo American, which supplies up to 8Mtpa of pellet feed. The pellet plant can produce high grade DR pellets with over 67% Fe with combined silica and alumina levels of less than 2.5%.



Rio Tinto’s Iron Ore Company (IOC) produces ~4Mtpa DR pellet from its Carol Lake pellet plant and could potentially increase output to 5Mtpa by 2025. The major customers are from Middle East countries, Trinidad and the US.

ArcelorMittal Mines Canada produced 10Mtpa of DR pellets, most of which were used in ArcelorMittal’s Canadian DRI pliron ore ants. It also shipped ~1Mtpa of DR pellets to its DRI plant in Hamburg, Germany.



Many companies plan to build green pellet plants to produce fossil-free DRI, such as LKAB’s 1.5Mtpa HYBRIT pellet plant at Malmberget, from 2025, but this new added production is only for their own steel plants. The supply of DR-grade iron ore pellets has been tight since the disruption of production at Vale’s Samarco pellet plant in 2015. In the short to medium term, AME does not see any significant increase in seaborne DR pellet availability, except from Vale’s Samarco resuming its pellet production in future.