Brazilian pig iron swings in April as U.S. seeks imports

Last week while many in the recycled metals community were attending the annual convention hosted by ISRI (now ReMA) in Las Vegas, the pig iron and DRI community members were attending the semi-annual (IIMA) meeting in Lisbon, Portugal.

Pig iron produced in Brazil had been on an upswing in early April, after a decrease in March. There was one cargo sold prior to the meeting at $450/mt FOB South Brazil, as buyers relented and paid the Brazilian asking price. Further sales were tabled until the meeting, which is usually attended by both buyers and sellers.

RMU reached out to a producer who attended the Lisbon meeting. He said that despite quite a bit of talk, there were no transactions concluded at the meeting. “We are offering to USA at $450 FOB Brazil for June shipment,” he said.

Brazil has been supplying nearly all of U.S. pig iron needs since the outbreak of hostilities between Ukraine and Russia. Prior to this, Brazil only accounted for 30%-35% of U.S. shipments, with the balance coming from Ukraine and Russia. The mills in the U.S. are trying to use less pig iron by improving their scrap quality or using other ore-based metallics (OBM’s) in their charges. Despite these efforts, American consumption remains above 4 million TPY and is expected to rise as flat-roll capacity is added.

One of the attendees in Lisbon spoke with Ukrainian producers. Ukraine has continued to ship pig iron to the U.S. over the last two years, but in considerably less volume and at much greater logistical costs.

He said, “The Ukrainians do not have much to sell (now) but the U.S. is their target market since it is the highest price.” There are no Russian shipments to the U.S. and will be none for the foreseeable future. Russia is shipping to other Asian countries but at prices considerably under paid by the United States.

RMU spoke with another trader about where Brazilian pig iron will go in the near future. He said Brazilian producers were “holding tight on their $450/mt number.” He expects new business to be at or just under that price.

Brazil is encouraged by predictions U.S. scrap prices may rise in May. This trader also related the domestic pig iron market within Brazil is looking much better after a prolonged period of absence. If this does, in fact, occur, there will be less pig iron available for export. The U.S. will have to either raise their price or find another source of supply. Either way prices will have to go up.

Let’s take a quick look at what pig iron costs in the U.S. versus prime scrap on a delivered mill basis. The latest price confirmed in Brazil is $450/mt FOB with an ocean freight to New Orleans of $35/mt. This would translate to $488/mt onto barges. The average logistical costs sending these barges upriver and then trucked or railed to final users is conservatively estimated at $32/mt. So pig iron in the furnace is about $520/mt ($528/gt). In April, #1 Busheling delivered to various mills at prices of $400/gt-$415/gt. So, the spread has now increased to over $100/gt. Although this is not unusual, it does allow for U.S. busheling prices to possibly rise going into May and June.