WSD’s Strategic Insights #2: Global cost to produce pig iron has dropped substantially in the past 18 months

The operating cost to produce pig iron, excluding plant overhead expense, has plummeted since April 2011 for plants that also include steelmaking facilities.  For the World ex-China, the operating cost for the producer at the 50th percentile position on the WSD monthly World Cost Curve (WCC) fell from $525 per tonne in April 2011 to about $325 per tonne in October 2011.  For China, the cost for the median-cost mill fell from about $465 per tonne to $325 per tonne.   

The current FOB port of export price for pig iron appears to be about $380 per tonne - or, perhaps $10 per tonne lower for pig iron suppliers in Southern Brazil and at some other locations.  The current pig iron price is above the operating cost of all Chinese producers, and for the World ex-China, the price is above 88% of the pig iron producers on the curve.  The marginal cost to produce pig iron is about $15 per tonne below the average operating cost for the median cost producer.

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