Brazil’s Vale and the independent pig iron producers in the southeastern state of Minas Gerais are set to meet by the end of the month to renegotiate the iron ore prices.
Small lumps in the 6.35mm to 25mm thickness range, the main ore consumed by the pig iron producers, is currently sold by Vale at $40.50/mt, ex-mine, no taxes included, stable during two months.
A pig iron producer told SteelOrbis that the sector cannot operate with such an iron ore price under the current scenario of extremely reduced pig iron prices, chiefly for the steelmaking grade product.
“If the price is not reduced we will have either to stop production or move to low quality small lumps, which are currently sold under the same conditions by small miners at $28.50/mt,” the source said, adding that the operation of the blast furnaces with such low quality ore is more difficult, but the financial result pays off.
Analysts believe that over the next few weeks more independent pig iron producers should stop operations, in view of the low margins derived from low pig iron prices and high raw materials prices.