Posted on 15 Jan 2021
CIS merchant pig iron offers remain high, having risen by $100/t tonne in the past month, but buyers are keener to book somewhat lower-priced, prompter cargoes diverted from China.
The trend, which tentatively started in December, has not gained momentum as yet, and may expire soon, as there is only a limited number of cargoes destined for China still en route, Kallanish calculates.
CIS mills' offers are mainly for March production and subsequent late-March/April loading, but small late-February-production tonnage is still available. The material would best suit Turkey, which typically pays higher and prefers prompter shipment. However, Turkish buyers' bids circling $565/t cfr did not resonate with CIS suppliers, as they continue indicating prices starting from $600/t fob Black Sea for all destinations. This is in anticipation of demand accelerating for second-quarter deliveries.
Mills' higher offers are underpinned by low availability of material in the global market, and rising scrap and iron ore prices during the past month. But they exceed traditional differentials by far, and are more in line with what buyers would be willing to pay in relation to finished products prices, market sources explain.
China's three-month long absence from the market and a number of diverted cargos, whose original price was over $100/t below current market prices, have enabled some buyers to buy cheaper than the ex-mill material. This has alerted others to the same.
How long the standout will last will depend, as usual, on the demand and supply dance. Both are precariously balanced on the remaining availability of China-destined cargoes and finished product demand dynamic, along with scrap market developments.
In any event, with sellers' books relatively full, they are unlikely to reduce offers until more clarity emerges towards the end of the month. The merchant pig iron market's limited supply and wide demand pool allows suppliers more space to manoeuvre than more downstream products markets, traders note.
Demand in the US is mild, with some Brazilian ex-China cargoes sold at $570-580/t cfr Nola in January. A few more, including CIS material, were understood to have been sold to Southeast Asia and the Mediterranean in a similar price range, traders say. US bids for new CIS material were heard at $580/t cfr also, well below sellers' current indications of $620-630/t cfr Nola.
Source:Kallanish
