Raw Material Prices
US buyers drive down pig iron prices amid pressure
Written by Stephen Miller
November 13, 2024
The pig iron markets have retreated over the last two months amidst a concerted effort by US-based buyers to drive down prices to more closely follow the lower domestic scrap prices. Pig iron prices had resisted the downward pressure this year that had plagued ferrous scrap. This is largely due to the sanctions on shipments from Russia and serious reductions of Ukrainian material.
Only over the last month or so have the US mills been successful in sourcing at reduced pricing. With the weakness in Southeast Asia on all ferrous materials, US buyers were able to source pig iron from India at fairly lower price tags. This caused Brazilian producers to succumb to price levels as low as $10-15 per metric ton (mt) under their offer prices from South Brazil. It is questionable if US mills can reliably source from India in the quantities they need at workable prices. So, they need to keep Brazilian pig iron actively shipping to the US. The Brazilians need to sell to the US as their main market. However, Europe could be another possible market going into 2025.
I reached out to an executive in the Brazilian trade. He said his current offer for high phos material is $435/mt FOB S. Brazil. He added that, over the next several months, the rainy season may reduce pig iron production by an estimated 20%.
Another source in Brazil reiterated caution about the rainy season. He also confirmed current offers were at $435-440/mt FOB, but there was one sale at $430/mt FOB recently. The freight to the US Gulf Coast is $25-30/mt depending upon the size of the cargo. He thought there could be some maintenance closures of pig iron production units if prices didn’t improve.
The lingering malaise in the US for scrap and steel pricing is weighing on hopes the Brazilian trade had for higher pig iron levels. However, the source mentioned there have been a few inquiries from Europe about potential shipments in 2025.
In fairness to the US buyers, it should be noted that even at the low point of $430/mt ($455 CFR), the cost of pig iron delivered to the steelmakers is approximately $500 per gross ton (gt). If you compared it to #1 Busheling $400/gt, the pig iron premium is still at $100/gt. So, it’s hard to blame them for trying all avenues to reduce this spread.
Another US-based pig iron trader told me that reducing this spread may be hard for the US mills to achieve. He said that with scrap markets firm for the next two months, prices for pig iron may have trouble dropping further. He went on to say that US mills want lower phos material, generally only available from North Brazil and Ukraine. These prices will remain firm at $485/mt CFR. This will increase the premium vs. prime scrap.
Stephen Miller
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