Miller on scrap: Pig iron market takes off

Written by Stephen Miller

The prices for all grades of pig iron have dramatically risen since SMU’s last report from Nov. 18. During this period, there has been renewed interest in pig iron by US-based electric-arc furnace (EAF) mills. Over the last three weeks, the price of basic pig iron produced in Brazil has risen from $415 per metric ton (mt) to $440/mt FOB Brazil. The delivered price to the US Gulf coast has increased from the low $440s to $470-75/mt. Some of this increase could be freight related, even though the vessels do not pass through the Panama Canal, which has been impacted by drought.

SMU contacted a director for pig iron exports for several producers in southern Brazil. He said his organization sold to the US at $430/mt FOB, and they are now asking $440.

We contacted a large pig iron trader based in the US about current and future market conditions. He confirmed current prices have risen to $465-475/mt CFR. He went on to say, “Trend is rising – expect $500-525/mt CFR NOLA during Q1’24.”

The pig iron market here was given a boost when a US mill purchased a cargo from the Ukrainian producer Metinvest. That delivered price was reported at $475/mt. This material has a lower phosphorus content than S. Brazilian material and sells at a modest premium.

So, what effect will these increases have on scrap prices and flat-roll steelmaking in our domestic market? Pig iron prices rose before scrap prices started to rise here. With pig iron prices rising, prices for scrap, mainly prime grades, will have more room to rise. This week US mill scrap buyers increased prices for #1 Busheling by $50 for December delivery. If indeed pig iron prices do climb another $50/mt in the January/February months, you can bet HRC will rise in concert with scrap surcharges or outright book increases.   

Back to Brazil. It’s being confirmed that Singapore-based trader PSU has purchased 150,000 mt of basic pig iron from S. Brazil on what could be a speculative basis since the FOB price was in the low $400s. This company was the main buyer when China entered the pig iron market 2-3 years ago and disrupted conventional trade flows to the US and Europe.

SMU has not been able to confirm the ultimate destination of these cargoes. Most feel it has to go to the US. If it is for China, it will be very disruptive again. However, pricewise, it doesn’t make economic sense for pig iron to ship to China from Brazil since China can buy much cheaper from other Asian producers. The main US buyers have sought to discourage speculation in the pig iron trade over the last 15 years. Will they make a deal with PSU to save some money? We’ll keep an eye on this.

The current price for Nodular Pig Iron (NPI) for use in American foundries is also on the rise. A US distributor assessed current NPI from Brazil at $550-575 mt CFR and sees it climbing to $625-50 in Q1.

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