Weekly SteelOrbis surveys of scrap insiders reveal a higher August prime and shredded scrap pricing outlook could hinge on whether US President Donald Trump follows through on plans revealed today by the administration to impose a 50 percent tariff on Brazilian pig iron exports entering the US.
As previously reported by SteelOrbis, the US president notified Brazilian President Luiz Inacio Lula da Silva today, that starting Aug. 1, all imports from Brazil will face an additional 50 percent tariff at US customs. And, while Trump earlier this week threatened to impose the new tariffs, it remains unclear to many steel market insiders whether he will implement the new trade policy, as the US president has used threats of additional tariffs as a negotiating tool in the past.
Pig iron is used extensively as a steel-making feed stock, with the US typically importing about 4-6 million tons of the material annually from Brazil, Russia and Ukraine. And, while the US has domestic blast furnaces capable of producing pig iron, they haven’t been competitive with imported material due to factors like costs and margins, experts say.
Trump said the Brazilian tariffs, which are about 10 percent higher than those imposed on other nations with similar trade deficits to the US, are in reaction to 2023 criminal charges levied against Brazil’s former president and Trump’s political ally Jair Bolsonaro, who is accused of plotting a coup over election results he says were falsified. As it now stands, the former Brazilian president is banned for running for political office in Brazil for 8 years, and could potentially face up to 40 years in prison if convicted of the charges.
According to a media report from Al Jazzera, in a letter to Brazil’s current president, Trump said July 9, that the treatment of Bolsonaro, who refused to publicly concede the presidential election that he lost to Lula in 2022, “is an international disgrace.” Trump likened Bolsonaro’s treatment to his own in during the contested 2020 presidential election, after which Trump faced charges related to seeking to overturn that election. His supporters also stormed the US Capitol before President Joe Biden took office, seeking to stop the certification of election results.
Trump has highlighted in media reports what he regards as parallels between himself and Bolsonaro. On Monday, Trump empathized with what was happening to Bolsonaro. “It happened to me, times 10,” he said.
Media reports indicate the escalation in tensions between the US and Brazil came as Lula hosted representatives from China, Russia, Iran and other nations for a BRICS summit of emerging economies in Rio de Janeiro this week.
“I’m getting a lot of mixed messages for August,” said one Gulf Coast scrap insider before the US president’s announcement on the additional Brazil tariffs. “The ongoing market chatter that President Trump might be putting a 50 percent tariff on Brazilian pig iron could drive up demand and pricing for (domestic) primes and shredded scrap in August,” he added. “This outcome remains to be determined, however, and even if it does happen, cut grades will remain sideways to down.”
The Brazil letter was one of 22 tariff notices Trump sent this week to various countries. On Monday, July 7, Trump extended a 90-day pause on sweeping global reciprocal trade tariffs to Aug. 1.
During the July scrap buy-cycle, US Midwest prime busheling scrap in the Ohio Valley settled sideways to June at $435-460/gt ($443-468/mt), while shredded scrap finished monthly trade steady to June at $375-380/gt ($381-387/mt). Ohio Valley P&S and HMS grades settled steady at $361-371/gt ($367-377/mt) and $325-345/gt ($330-387/mt), respectively, scrap insiders told SteelOrbis.
In the US Northeast, the resulting sideways to June, July scrap settlement saw US Northeast busheling scrap finish at $380-400/gt ($387-407/mt), while shredded grades settled at $325-335/gt ($330-342/mt). P&S and HMS grades finished at $295-305/gt ($300-310/mt) and 305-320/gt ($310-325/mt), respectively, scrap insiders said.