Brazilian pig iron market gains traction

However, we also reported there were four cargoes sold to Europe at $395/mt FOB, mainly to Italy and Germany. The cargo, which was sold to Germany contained mostly foundry-grade specialty pig iron, with only a segment of the shipment being steelmaking basic pig iron. So, let’s say there were only three European full basic cargoes sold.

SMU spoke to an industry executive in Brazil, who said since then the US did buy a January cargo at the same European price of $395/mt FOB. The freight to the US is estimated at $27/mt, which means the CFR price is $422/mt before the buyer is charged the 10% tariff. The executive added he heard of a booking today at $400/mt FOB and he expects prices to continue to rise.

We also heard from the director from another large channel that a US buyer has offered $440 CFR for a cargo of basic pig iron which is said to be “low P” from the North of Brazil. However, he said the deal is not done yet.

Let’s take a look at how these new price levels for pig iron compare with domestic scrap. Based on the most recent transaction for pig iron slated for shipment to the US, the estimated cost is $427/mt CFR New Orleans. At this recent price, the spread between #1 Busheling and basic pig iron delivered to US furnaces has widened.

The cost of pig iron delivered to mills along the Lower Mississippi is estimated to be $468 per gross ton (gt) vs. a December busheling price of $420/gt. Historically, this is not a very abnormal premium. However, when the 10% tariff is applied, the cost rises to $508/gt for a spread of $88/gt.

Pig iron buyers in the Chicago and Central districts will be hit even harder. The spread for these buyers rises to $125/gt based upon a busheling price of $400/gt and higher logistics.