Pig Iron and Ferrous Scrap Markets Still Under Pressure

There appears to be a lot of uncertainty in the ferrous scrap and pig iron markets as we move into the second half of February and start taking a peak into what March scrap and pig iron pricing may look like.

One of our pig iron sources advised SMU that many of the Brazilian pig operations have closed down due to the low prices.  We were told, “There are really no spot prices on pig iron now.  There have been closures of producers in Brazil and have heard no offers from there recently.  There are some traders who may be long but who are offering either spot barges of material ex warehouse.  Those prices could be as low as $275-305 GT FOB Barge river port Chi/Pgh [Chicago/Pittsburgh].”

We also discussed the subject with scrap guru Mike Marley of MetalPrices.com. Marley told us, “No new deals with the Brazilians.  Ukrainians were offering pig at $320 delivered NOLA, but there are no takers at that price.  There is too much iron already here.  Much of it is owned by iron traders who are trying to unload those positions.  One trader told me that they are willing to take a $10 per tonne over the No. 1 busheling price.  I estimate that would put the price at about $275-280 per tonne [metric ton].”

Steel Market Update has been hearing from some of our scrap sources that there may be more weakness in the ferrous scrap markets. We are hearing prices may drop another $20 per gross ton in March. This would be on top of the $80 to $110 gross ton drop we witnessed earlier this month.

Mike Marley told us this morning, “On scrap, I’m hearing anything from sideways on the obsolete grades to down as much as $20 per ton on all grades of scrap.  There is a lot of uncertainty.  Much of the downward pressure is on the industrial grades like busheling and bundles [prime grades].  The question on heavy melt and shredded is whether the steep price drop and the colder weather will reduce the availability as much as dealers claim.   Some mills and brokers said it doesn’t matter. There is enough in the supply pipeline to carry them into next month.   Some mills are still getting deliveries of scrap bought in January and have yet to receive scrap bought his month.”

Marley went on to say that prime grades of scrap are being pressured by the lower pig iron prices, “Some of these traders may be taking a $100-per-tonne haircut on that iron. That is pressure on dealers who failed to sell all of the busheling they offered the mills this month.” 

One of the scrap dealers with whom we communicate on a regular basis told us, “I expect Busheling to trade lower in March than February.  But there is not much shred available in the market so I don’t expect obsolete grades to trade lower and could even trade slightly higher than last month.  Many people I speak with are expecting prime and shred to trade on the same level or you may even see prime trade a little below shred.”

SMU Note: In a normal scrap market prime grades of scrap such as #1 busheling and dealer bundles would trade at a premium over shredded scrap. The reason being prime grades have fewer residuals than shredded or obsolete grades. You can learn more about scrap inputs, mill costing to produce steel and how steel is bought and sold by attending one of our Steel 101: Introduction to Steel Making & Market Fundamentals workshops. The next workshop will be held close to Chicago and will include a tour of EAF mini-mill producer NLMK Indiana. Details about the program, locating and costs can be found on our website.