With the shortage of scrap supply and rising steel production levels in the US market, US demand for pig iron is increasing; however, supply of pig iron available for export to the US is not plentiful.
Brazil, one of the major pig iron exporters to the US, is limiting its pig iron export allocation, as the country's domestic pig iron market is strengthening and domestic supplies are limited. Additionally, there are cost benefits for producers to sell domestically rather than to the export market. A market source told SteelOrbis, “There is tax rebate for domestic pig iron sales, so it’s a bad choice for export.” Furthermore, with the added cost of shipping, Brazilian pig iron suppliers cannot achieve a profitable margin when selling to the US.
On the supply side, about 75 percent pig iron mills in Brazil were closed in the first half of year due to the sluggish steel market. Many of these mills have since been restarted; however, even with the improved domestic demand, only about 60 percent of Brazil's pig iron mills have resumed production, so there is generally only enough production to serve the local demand, with little room for exports.
Due to the abovementioned cost and supply factors, currently, Brazilian suppliers are selling pig iron primarily to the domestic market and conducting very few sales to the US.
For the few export offers that are still available, prices remain at approximately $340 to $345/mt FOB northern Brazil, which is unchanged from a month ago. Russian pig iron exports are offered at $350 to $355/mt CFR Nola, though only one or two transactions have been concluded in recent weeks.
The latest statistics show that total amount of pig iron imported into the US in July 2009 was 217,127 mt, representing a significant increase of 203,594 mt when compared to the figure of 13,533 mt in June. The main pig iron import sources for the US during July were: Russia, at 133,149 mt; Brazil, at 75,042 mt; and Canada, at 8,935 mt.