The quiet market conditions in the US import basic pig iron (BPI) market have been interrupted by a new deal from Brazil widely discussed in the market, which is $16/mt below the price in the previous deal, SteelOrbis has learned on July 18.
A contract for 35,000 mt or so of ex-Brazil high phosphorus (0.15 percent) BPI has been concluded at $404/mt FOB recently, according to a number of sources, which is down by $16/mt from the previous contract done at around $420/mt FOB. Also, a few sources believe that the recent deal includes $4/mt of financial costs, and so the market in fact is already at $400/mt FOB. This deal price translates to around $430-435/mt CFR, while the previous reference price, based on deals for ex-Brazil BPI in the US, was at $445-450/mt CFR at the lowest.
Such a drop is another surprise for some market sources as the expectations for the trend in the US domestic scrap for August are mainly from stable to up. However, most international traders assess this contract level as “not surprising” and “quite expected”, taking into account the weak sentiment due to no improvement in demand and the tough economic environment.
“Scrap price expectations are just wishful thinking. To understand the real problem, we have to consider the monetary policy from the central bank over past years [and very high inflation as a result]… Inflated prices meet shrinking demand and thus there’s still room to correct down further,” a European trader said. Another source said that scrap prices in the US are at a very high level compared to BPI, and so mills try to get lower levels for the latter to balance costs.
In addition, the recent trend is that the US mills are buy smaller Handysize cargoes, while usually they prefer Panamax. This new tendency is also impacting Brazilian producers who are struggling to sell and failed to push prices as they expected at least a few weeks back.
In addition, there has been information circulating in the market that a Ukrainian mill has offered BPI with 0.12 percent phosphorus content at $450/mt CFR to the US. This is also a big drop from the previous offers of $470/mt CFR and above. However, there has been no confirmation that a deal was done as bids have been reported at $440-445/mt CFR.
The SteelOrbis daily reference price for imported BPI in the US has settled at $430-445/mt CFR, down by $10/mt on average from the previous level, as the price includes not only the recent deal from Brazil but also bids and the tradable level for ex-Ukraine pig iron, which has lower phosphorus content.