Pig iron: Prices up on trades ahead of conflict

: Metals
22/02/24

The seaborne basic pig iron (BPI) market strengthened on fresh US and European bookings of Brazil- and CIS-origin material concluded at higher levels late last week, before the market was thrown into uncertainty by the escalation of tensions between Russia and Ukraine culminating in Russian's invasion of Ukraine on Thursday.

CIS

The Argus fob Black Sea weekly price for Russian and Ukrainian BPI moved up to $575/t today, surging $30/t higher from 17 February, driven by sales done to Italy, Turkey and the US late last week.

A Ukrainian producer sold a combined tonnage of 10,000t to two traders in Italy - 5,000t to each - at an average price of $615/t cfr. The shipment is scheduled for early April. The deal price roughly equated to $570–575/t fob Black Sea as one of the buyers estimated a freight rate for the parcel at $40-45/t.

Another Ukrainian exporter traded a 15,000t dispatch to a Turkish steelmaker at $585/t fob, which was in line with the seller's latest offer targets. The delivery is planned for late March. Having finalised the sale, the exporter began to offer April shipment at $600/t fob.

A 30,000t cargo of Russian BPI was bought by a US trader at $615/t cfr, with the fob equivalent price estimated by market participants at around $575/t.

Following the trade, a large Russian steelmaker planned to enter the global BPI market with $630–640/t cfr offer targets of April shipment meant primarily for the US. But rising Russia-Ukraine tensions left the market bracing for potential sanctions against Russian business, and the steelmaker stepped back.

Russia/Ukraine conflict

As of yesterday, after Russia recognized Ukraine's breakaway provinces as independent states on Monday, 21 February, no sanctions imposed then by the EU, US, UK and some other governments have yet had a significant impact on Russian commodity exports and, in particular, on the metallurgical industry.

But market participants said the US office of foreign assets control reportedly issued recommendations to banks to not service transactions in US dollars related to export of goods from Russia. Similar advice was heard issued by authorities in Europe, while banks in Singapore were said to have counselled their clients to avoid business with Russia amid very high political and financial risk.

The escalation in the Russia-Ukraine crisis also exerted pressure on logistics from the Azov and Black Seas as the London-based Joint War Committee (JWC) of maritime underwriters added Russian and Ukrainian waters to its list of "full war, piracy, terrorism and related perils listed areas" last week.

Russia's launch of an invasion into Ukraine, this morning has put on hold any trade operations in the Black Sea region, with wide-ranging effects on seaborne BPI supply now highly likely to emerge in the coming weeks.

Russian military forces and federal agency of sea and river transport Rosmorrechflot suspended shipping in the Azov Sea today until "special order," the agency stated. Ukraine's Azov Sea port Mariupol was consequently shut down.

Ukraine was also heard to have officially halted operations in its large Black Sea deep-sea port Yuzhny, declaring force majeure. Market participants said vessel movements in and out of all Ukrainian Black Sea ports have ceased. Many shipowners expressed unwillingness to commit vessels into the Black or Baltic Sea.

Once higher uncertainty permeated the market many BPI buyers, including in the US, stepped back and became wary of purchasing Russian material, at least until some clarity on whether there could be further sanctions on Russia that may impact ferrous exports from the country or payment terms.

As a result, Ukrainian BPI exporters detected a cautious increase in the number of requests from US buyers, although solid bids were not indicated. In response, sellers were in no hurry to indicate counteroffers because of the uncertainty they face about the future of production and deliveries.

Ukrainian major steelmaker Metinvest, which operates two assets in Mariupol including Ilyich steelworks that produces pig iron, said logistics chains were not broken as of mid-day on Thursday, apart from the disruption to ports. But the company may yet stop production at its mills under pressure from Russian military action. Another producer, ArcelorMittal Kryvyi Rih, said later today: "As far as our plant is concerned, our team is working to slow down production to a technical minimum and production will be stopped at our underground mines."

Some steelmakers in Europe were heard to have suspended offers of steel products today over concern about stability of BPI supply and, consequently, steel output.

Brazil, US

Brazilian BPI producers adopted a wait-and-see stance this week, with offer indications limited and expectations bullish.

The latest price for Brazilian material achieved in a concluded deal was $585/t cfr Nola as a large Brazilian exporter sold 35,000t of high-phosphorous BPI for April shipment to a US steel producer late last week. The deal netted back to around $550/t fob south Brazil.

Another 30,000t cargo containing Brazil-origin pig iron of various grades, including around 15,000t of BPI, was booked by a US trader as regular once-a-quarter business. The price for BPI within the deal was heard from $600/t to $615/t cfr but could not be conclusively confirmed.

Some market participants pointed to $580-600/t fob as possible levels for the next sales of Brazilian BPI if shipments from Russia and Ukraine are disrupted as expected.

The Argus weekly BPI fob south Brazil price assessment settled at $550-560/t today, up $7.50/t on average from last week. The fob north Brazil BPI assessment followed suit to rise to $560-565/t today, the same $7.50/t higher than the prior level.

The Argus weekly cfr Nola BPI assessment increased by an average of $30/t on a week earlier to stand at $585–590/t today, reflecting the new trades.

Asia

BPI values in Asia-Pacific rose over the past week, buoyed by stronger buying interest from Taiwan, Japan, South Korea and Thailand, while China was broadly quiet with no indications heard in recent weeks.

All Asia-Pacific demand this week was covered by India-origin material. A prompt cargo of 15,000t was reported sold to Thailand at around $650/t cfr. A similar-sized parcel was heard traded to Taiwan at $635/t cfr, although final details could not be confirmed by the time Argus went to press.

In addition, a 20,000t cargo to Korea and a few small dispatches to Korea and Japan were heard to changed hands at $630–640/t cfr. All these indications were much higher than regional price ideas of around $595–600/t cfr heard last week.

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