Emirates SteelIndia's state-controlled KIOCL has reached an initial agreement to supply high-grade iron ore pellet to Abu Dhabi-based Emirates Steel.

KIOCL could supply around 0.5mn-1mn t/yr of pellet to Emirates Steel, an official at the Indian firm said. The price arrangement has not been finalised yet.

Emirates Steel has 3.5mn t/yr of capacity to produce rebar, wire rod and heavy sections.

Dubai-based trading firm Star Global is also party to the supply agreement, KIOCL said, without giving details.

Most Middle East steel companies source iron ore pellet from within the region. The largest supplier is Bahrain Steel, which has the capacity to produce 11mn t/yr of high-grade pellet.

KIOCL produced around 2.24mn t of iron ore pellet in the financial year that ended 31 March. It typically exports around 80pc of its production. The company aims to produce 3mn t of pellet in 2019-20.

The company is moving its pellet exports away from China to other regions such as the Middle East, Japan and South Korea because of weaker prices of low-alumina (2pc) pellet in the China market. Around half of KIOCL's pellet exports in 2019-20 could go to non-China markets, a senior executive said.

KIOCL typically issues at least one tender to export of 50,000 t/month of pellet, with prices offered on a fob New Mangalore basis.

The Argus-assessed weekly price for 64pc Fe, 2pc alumina pellet was at $123.5/dry metric tonne cfr China on 30 April.