SÃO PAULO Brazils domestic pig iron tags will likely come under pressure after a second export deal for 50,000 tonnes of pig iron from Brazils southeastern Minas Gerais state, sources said.
Prices in Minas Gerais have been stable at some 740 real ($313) per tonne ex-works the past few months but could rise in the near future on lower supply and the devaluation of Brazils currency.
"Producers will have more bargaining power," one local trading source said Aug. 29.
"Were talking about 100,000 tonnes sold within one montha volume that wont be available to Brazilian steelmakers," a second source agreed.
Minas Gerais pig iron producers sold the 50,000-tonne cargo to a trading company after a similar deal around the end of July to early August.
The first sale was at $378 per tonne f.o.b., and the second at $375 f.o.b., mainly due to a more favorable exchange rate for exporters.
At the same time, utilization rates in Minas Gerais remain depressed at about 30 percent of installed capacity, and so far there is no news about restarting idled blast furnaces.
But a shift from normal payment terms could favor Brazilian steelmakers. Mills typically pay merchant pig iron producers within one day of delivery of the cargo. But in these two export transactions, payment by the trading company that bought the cargoes will be made upon receipt of the bill of lading.
"This means payment will probably be made within 10 to 15 days from the shipment of the cargoes," a source said.
Brazilian pig iron export deals normally have producers receiving several payments for a single transaction.
"They transport their cargoes in portions to railway stations and get 85 percent of the value of those volumes as soon as they reach the stations," the source said. "This way, they have working capital to continue operating."
Nonetheless, Minas Gerais pig iron producers are soon expected to begin seeking higher prices for product sold to local steelmakers.
"Well have to wait and see what happens," a source said.
A version of this article was first published in AMM sister publication Steel First.