Brazilian and Commonwealth of Independent States (CIS) pig iron
producers are looking to adjust their output and marketing
strategies in response to challenging market conditions.
The pig iron industry, hit by
weak demand and depressed prices in recent years, is set to
face another blow when Charlotte, N.C.-based steelmaker Nucor
Corp. commissions its 2.5-million-tonne-per-year direct-reduced
iron (DRI) plant in Louisiana later this year. The new supply
of DRI in the market is likely to reduce Nucors need to
import pig iron and other scrap substitutes.
CIS producers do not expect to
be significantly affected by Nucors DRI plant, as they
mainly export to local markets in northern Europe and the
This is also the case with
Ukraine exporters, which rely more on sales to Turkey and Italy
than to the U.S. market.
In Russia, pig iron producers
also export to nearby regions, but they could soon turn more
strongly to domestic markets as the number of mini-mills able
to consume scrap and scrap substitutes is set to soar this
But end-user demand in Europe,
particularly in the southern parts of the continent, remains
thin. With falling iron ore and scrap prices, CIS-origin pig
iron prices have fallen in tandem, reducing producer
Russian basic low-manganese pig
iron was at $410 to $425 per tonne f.o.b. Baltic Sea, and
Ukrainian basic material was $380 to $385 per tonne f.o.b.
Black Sea, according to assessments June 6 by AMM
sister publication Steel First.
Meanwhile, Brazilian pig iron
producers are increasingly worried about losing ground in their
main market, the United States, as DRI production capacity is
set to rise in the North American country.
In Carajás, northern
Brazil, Nucors plans to move into DRI have long been
worrying local pig iron producers; Nucor had previously
considered building the DRI plant in Brazil before opting for
Anticipating falling demand for
pig iron in the futureand also looking to gain from
higher added-value productssome Carajás pig iron
makers decided to move downstream into steel production even
before the 2008 global financial crisis.
Besides the move into steel, the
Carajás pig iron industry was also hit by stricter
environmental and labor rules. On a number of occasions,
Brazilian miner Vale SA suspended iron ore shipments to local
pig iron makers, alleging they had failed to comply with
environmental and labor laws.
Pig iron makers were then forced
to prove they were buying charcoal to charge their blast
furnaces only from legitimate companies, which prompted several
producers to invest in their own planted forests to in a bid
achieve self-sufficiency in charcoal supplies.
The issue, coupled with the fact
that pig iron prices collapsed in the international market
following the 2008-2009 financial crisis, caused the closures
of several pig iron plants in the region over the past few
Carajás pig iron export
prices fell to little more than $380 per tonne f.o.b. recently,
down from 2013s peak of $415 to $420 per tonne two months
ago and some distance from the historical high of $850 per
tonne achieved in the middle of 2008.
The general expectation in
Brazil is that, even if U.S. pig iron imports do fall
considerably after Nucors plant comes onstream, shipments
from Carajás would not be much affected after all
because production levels are already very low.
Weak buying activity has also
seen capacity reductions in the CIS region. Russias OAO
Tulachermet and Novolipetsk Steel (NLMK) recently idled parts
of their production, while market participants in the region
hope for market activity to return.
Nina Nasman, London,
contributed to this story.