Raw Materials Prices: Iron Ore, Coking Coal, Pig Iron, Scrap, Zinc

Written by Peter Wright

The price of iron ore corrected in August with a $32 per dry metric ton decline, while the four-month-long decline in the price of scrap reversed slightly.

Table 1 summarizes the price changes through Aug. 21 of the five materials considered in this analysis. It reports the month / month, 3 months / 3 months and 12 months / 12 months changes and tells us that the traditional price relationship between iron ore and scrap has come back in line after being heavily weighted towards iron ore in July. Pig iron also reversed course in August with a price increase as coking coal and zinc continued to decline.

Iron Ore

Based on CRU’s data, the weekly average spot price of 62% fines delivered North China was $88.60 per dry metric ton on Aug. 21, down from $120.50 on July 17. This reversed a four-month period of price increase. Figure 1 shows the price of 62% Fe delivered North China since January 2009. The price of ore is still above the $20 range that prior to February 2019 had existed for a year and a half.

Coking Coal

The price of premium low volatile coking coal FOB east coast of Australia declined in June, July and August and on Aug. 21 was lower than at any time since June 2017. The August price is $152.20 per metric ton, down from $210.00 in May (Figure 2).

Pig Iron

Most of the pig iron imported to the U.S. currently comes from Russia, Ukraine and Brazil with additional material from South Africa and Latvia. In this report, we summarize prices out of Brazil and average the FOB value from the north and south ports. The price had a recent peak of $400 per metric ton in May and June last year and had fallen to $332.50 in July this year before partially recovering to $342.50 in August. The average price in August was 14.7 percent lower than in August last year.  


To put this raw materials commentary into perspective, we include here Figure 4, which shows the spread between busheling in the Great Lakes region and hot rolled coil Mid West U.S. through mid-August 2019, both in dollars per net ton. The spread collapsed from $564 in August last year to $285 in June before recovering slightly to $320 in August 2019, and is now in the range that has been relatively normal for the last eight years.

Figure 5 shows the relationship between shredded and busheling both priced in dollars per gross ton in the Great Lakes region. This spread was unchanged at $20 in the four months May through August and was the lowest since April last year.  

Figure 6 is a scatter gram of the price of Chicago shredded and the monthly Broad Index value of the U.S. dollar as reported by the Federal Reserve. The latest data for the monthly Broad Index was July. This is a causal relationship with a negative correlation of almost 73 percent.

There is a long-term relationship between the prices of iron ore and scrap. Figure 7 shows the prices of 62% iron ore fines delivered North China and the price of shredded scrap in the Great Lakes region through mid-August 2019. The correlation since January 2006 has been over 79 percent. There was a very unusual divergence in these prices in 2017 and 2018 that benefited the integrated producers, but that situation has now corrected leaving the EAF producers with a small advantage in a historical sense.

In the last 10 years, scrap in dollars per gross ton has been on average 3.4 times as expensive as iron ore in dollars per dry metric ton (dmt). The ratio has been erratic since mid-2014, but at 3.2 in August has reverted to a normal level (Figure 8). A high ratio benefits the domestic integrated producers and a low ratio benefits the EAF producers.


The LME cash price for zinc mid-month is shown in Figure 9. The latest data is for Aug. 21 when the price was $1.02 per pound, down every month from $1.33 in mid-March.

Zinc is the fourth most widely used metal in the world after iron, aluminum and copper. Its primary uses are 60 percent for galvanizing steel, 15 percent for zinc-based die castings and about 14 percent in the production of brass and bronze alloys.

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