GLOBAL PIG IRON WRAP: CIS exporters get higher prices on material shortages
Pig iron exporters in the Commonwealth of Independent States managed to obtain higher prices for their material in the second half of May, when buyers started to restock, because of reduced material availability.
Brazilian suppliers, meanwhile, were concentrating on their domestic market and contending with issues of raw materials supply because of a truck drivers’ strike in the country.
Metal Bulletin’s export price assessment for high-manganese pig iron from the CIS region was $385-390 per tonne fob Black Sea on Thursday May 31, increasing from $365-385 per tonne fob Black Sea early in the same month.
The assessment went up mainly due to higher deal prices in Italy, where buyers accepted higher offers after a long-lasting silence in the market.
“Eventually, Italian buyers accepted higher prices from [the CIS] exporters because they needed to restock,” one trader told Metal Bulletin. “Buyers understood that suppliers will not cut offers for Italy, because they can sell large tonnages to the United States at high prices.”
Normally, buyers from Italy purchase around 5,000-10,000 tonnes at a time, while buyers from the US prefer to book 50,000-60,000 tonnes in each cargo.
In mid-May, a Ukrainian supplier sold to Italy a small cargo with prompt shipment at a price around $405-410 per tonne - close to $385 per tonne fob Black Sea. Before this deal, Italian buyers had not been ready to accept prices equal to those in the US market since mid-April.
Buyers in the US, the largest global consumer of merchant pig iron, started to restock in mid-May, when scrap prices became clear for May. All cargoes were booked at $405-410 per tonne cfr from CIS and Brazilian suppliers.
So pig iron prices in May were almost unchanged compared with deal prices in April, despite the fall in the scrap market.
In May, shredded scrap prices went down by $20 per ton in the US South, by $15 per ton along the Mississippi River and by $10 per ton in the Midwest.
“There was a shortage of pig iron in the [US] market. That is why the price didn’t follow the [trend in] scrap,” a trader told Metal Bulletin. “If [the price of] busheling had gone down in May, it would have had some effect on the pig iron market; shredded is not so important an indicator.”
Demand for pig iron was high in the US because of increases in production driven by the market changes that followed the outcome of the country’s Section 232 trade investigation.
Adjusted year-to-date production in the week ended June 2 was around 35 million tonnes, at a capability utilization rate of 75.5%, according to the American Iron & Steel Institute (AISI). This compared with 34.3 million tonnes during the corresponding period last year, when the utilization rate was 74.3%.
Additional demand appeared because of outages planned for June at two US plants that produce direct-reduced iron (DRI) and hot-briquetted iron (HBI).
Nucor’s DRI plant in the state of Louisiana, with capacity for 2.5 million tons per year, will be down for scheduled maintenance for 30 days beginning around June 18, according to American Metal Market. And Voestalpine’s HBI plant could be down for 20-22 days in the same month, also for scheduled maintenance.
While demand continued to be strong in the US, supply was restricted because Brazilian exporters were almost out of the market.
Suppliers in the south-eastern state of Minas Gerais were focused on the domestic market. Increased production at Brazil’s electric-arc furnaces (EAFs) required a higher intake of merchant pig iron.
In January-April, the output of steel from Brazil’s EAFs reached 2.6 million tonnes. This was 6% more than in the corresponding period last year, according to an estimate by Metal Bulletin Research based on data from the World Steel Association (Worldsteel).
Local Brazilian mini-mills may have to increase the volume of pig iron in their steelmaking mix because there is a shortage of scrap in the local market.
“There is a lack of scrap in Brazil today and prices have moved up substantially, but it varies a lot depending on the region,” one Brazilian pig iron producer told Metal Bulletin.
A supplier in the northern Carajás region, after the sale to the US in mid-May, was booked up until September.
Pig iron production has also been affected by Brazil’s nationwide truck drivers’ strike, which began on May 18. All pig iron production facilities in the country came to a halt because the strike prevented deliveries of coal to feed their furnaces, according to local reports.
Ukrainian producer ArcelorMittal Kryvyi Rih (AMKR) was also affected by a strike among its own workers.
A protest among railway staff at the works began on May 16 and paralyzed the production of all blast furnaces except No6.
“[AMKR] is not a regular pig iron supplier, but it can sell as much as 50,000 tonnes per month if the market is high,” one trader told Metal Bulletin. “But due to the strike it will not have pig iron tonnages to offer to the market, so it has definitely reduced the availability of material from the Black Sea.”
All other principal pig iron suppliers in the CIS were fully booked from the end of May until August.
Ana Paula Camargo in São Paulo, Alona Yunda (Metal Bulletin Research) in London and Sean Barry (Scrap Price Bulletin) in New York contributed to this report.