Miller on Pig Iron: Brazilian tariffs threaten turmoil in sector

If these tariffs are indeed levied (they’re set to go into effect on Aug. 1) and remain for any significant time, their impact will be significant. Tariffs of this magnitude will boost the cost of pig iron, DRI/HBI, and probably domestic scrap.   

Pig Iron

SMU spoke to a Brazil-based pig iron trader who told us in H1’25, Brazil exported 1.62 million metric tons (mt) of pig iron to the US, which accounted for 90% of all their exports.

“It will be interesting to see what happens in the next weeks,” the trader said.

He also pointed out Brazilian producers do have pig iron under contract for shipment to the US for August and September. These cargoes were booked earlier at prices of $396-410/mt FOB Brazil with freights of $30/mt from South Brazil.

If tariffs are in effect on Aug. 1, will the US buyers cancel these shipments or accept them and pay the tariffs? The proposed tariff would increase the prices of pig iron under contract by around $200/mt. This would raise the procurement price from ~$470/mt (10% tariff included) to $630/mt on a delivered basis to US ports. On new cargoes, this tariff amount would likely increase as pig iron prices go up.

Another source in Brazil said he can’t imagine the US mills would accept a $200/mt increase in pig iron already booked. This situation is going to hurt US-based hot-rolled coil (HRC) producers as well as their suppliers in Brazil.

Other options

Are there other countries the US mills can turn to avoid the steep tariffs on Brazil?

The list is quite short. Ukraine is currently supplying the US. Through May of this year, they have shipped 581,000 mt to the US, according to the State Customs Service in Ukraine.

This is about two full cargoes per month. The tariff the mills pay is only 10%. This helps, but it is already “baked into the metallic cake.” The steel industry needs a lot more pig iron than what Ukraine can supply. Plus, the price of this material is likely to increase sharply.

India is another source. But they only have about 50,000 mt available for export per month, according to sources we have spoken to.

Sourcing from India will be difficult given the rising freight rates and potential tariff of 27%, barring a trade deal. 

Other possibilities are Russia, but only if sanctions are lifted. Indonesia also could be a source, but again, tariffs may exclude them, not to mention the freight.   

HBI      

An alternative to pig iron is HBI/DRI. All the DRI that is imported comes from Trinidad & Tobago and is used exclusively at Nucor steel plants. Though Nucor owns a DRI plant in Trinidad, material is still subject to a 10% tariff. 

The US does not receive other imported DRI since it is considered a hazardous cargo by the maritime industry.

However, HBI is not hazardous and can be imported.  The likely sources are Southeast Asia, North Africa and the MENA region. This will be an expensive trade with high freight costs and those pesky tariffs.

Prime scrap

If the tariffs are imposed on Brazil, they will likely result in causing a significant rise for prime grades of scrap in the US market. 

We all saw what happened to busheling prices back in 2022 after the Russia pig iron sanctions. The price of prime scrap in 2022 quickly jumped from $495 per gross ton (gt) in March to $760/gt in May.  Could this situation repeat itself in 2025?  

There does not seem to be any good alternative for US EAF flat-roll producers. They absolutely need pig iron to reduce residual alloys present in their scrap supplies. At present, there are not enough supplies of domestic pig iron production, HBI, prime scrap, or upgraded shredded scrap to do the job. Unless these tariffs come back to earth, they are going to impose a hardship on HRC production in the US.

Nucor, Steel Dynamics Inc., and U.S. Steel did not return requests for comment by time of publication.