In the last days of February, demand in the pig iron markets has shown any signs of the improvement which had been anticipated.
The large foundries in the Turkish domestic market, which mostly serve the European market, have stepped up their production cutbacks in the last weeks of February, with production on average down to 50-60 percent of capacity. Some foundries are waiting for the conclusion of state tenders and hoping to receive orders in the short term, while some others continue to produce for orders coming from the white goods sector, even though the volume of such orders is low.
On the Turkish producers' side, mills are providing financing facilities to the foundries and extending maturity periods in order to expedite their purchasing activities. Kardemir has this week applied a discount and lowered its H1 price to $350/mt + VAT, while the H2 price has also decreased to $340/mt + VAT. Meanwhile, the same producer's C1 price has been slashed to $300/mt + VAT, while its C2 price has decreased to $290/mt + VAT.
In general, in the Turkish domestic market basic pig iron is being transacted at the level of $330/mt + VAT for deferred payments, while for high tonnages the BPI price is at $320/mt + VAT.
European foundries have been operating at an average of 30-40 percent capacity, while they have continued to make small tonnage purchases just to satisfy their weekly needs for delivery of orders. Polish foundries try to deliver their weekly orders by working only three to four days in a week. In the Polish market BPI offers given from Russia have remained unchanged at the level of $300/mt DAF Poland and foundry pig iron offers from the same origin remain at $370/mt DAF Poland - both for March shipment.
It is thought that in northern European countries, e.g. Sweden, which invest in renewable energy sources, positive developments will start to be observed in terms of wind power in the context of new EU energy strategies and of governmental studies relating to such energy sources. Thus, it is expected that foundries which serve the wind turbine sector will do good business in the coming period.
It is observed that Russian producers have been trying to maintain prices at beginning of February levels. A Russian producer who has filled its order book for March intends to revise its prices depending on whether China decides to return to the markets for April shipments. The huge pig iron purchases carried out by China at the beginning of February are the main factor behind the decrease in China's purchases over the last two weeks and behind the lack of any booking in the market by Chinese producers this week. It is thought that Chinese buyers will evaluate their material requirements depending on demand levels in March before they proceed with any further purchases.
Export offers of Brazilian producers are at the level of $265-270/mt FOB; however, southern Brazilian producers have continued to work at 20 percent capacity, since China is absent in the market for April shipment purchases.
All producers are now focusing their attention on the price levels in the annual iron ore contracts which are expected to be concluded in the coming months. The producers who will revise their production costs depending on these price levels will be well prepared to meet the recovery in demand when it eventually happens.
It is likely that pig iron market players will observe the markets closely at the beginning of March and likewise carefully follow developments in the raw material markets.