Prices of CIS pig iron have declined sharply after peaking two weeks ago, amid falling demand and increasing availability, as downstream products sales become increasingly difficult.
With Western markets closed to new imports due to tightening restrictions against the Covid-19 spread, China is the only buyer, and it is progressively cutting the prices it is willing to pay.
Three Russian cargoes of pig iron have been sold to China, with prices reducing with each sale. A Russian 50,000-tonne cargo was sold at $335/tonne cfr at the end of last week, followed by another cargo from the same mill at $327/t cfr early this week. Another Russian supplier sold a large cargo to China more recently at $325/t cfr, Kallanish learns.
Chinese buyers' appetite is still buoyant, sources say, but they are aware of being the only paying market, and they are taking advantage of this. Some traders reckon prices will continue to decrease until restrictions are over and other major pig iron-importing regions are back in the market. "Or, until CIS suppliers hit the cost level and start reducing output, whichever happens first," one trader quips.
This is already happening to some suppliers. Both major Ukrainian pig iron suppliers have announced output restrictions without giving too many details. It is understood at least one of them is already placing some blast furnaces in maintenance mode. Russian mills are understood to still be producing at full capacity, but some of them look set to reduce output on the back of reduced activity at their European re-roller units. This is pressuring semi-finished product operations and increasing pig iron availability.
Sources note buyers inside locked-down regions are asking for postponement of deliveries, as they cannot accept cargoes. The number of renegotiations and cancellation attempts is increasing, participants say, and understandably so. "There is a lot of paperwork, to-ing and fro-ing. It is difficult to plan," one mill concedes.