- USA re-emerges as top seaborne buyer
- Russia export tariffs boost supplies by other exporters
- Continued restrictions on BF production in China may trigger imports
Global seaborne trade in pig iron shrunk by 3.4% in calendar year’21 (CY’21) to just over 13 million tonnes (mnt) from 13.83 mnt in CY’20 on lower imports by the world’s top steel producer, China, which was somewhat offset by the USA increasing sourcing on higher demand amid increasing steel capacity, SteelMint data reveals.
Major exporters
Among the major exporters, the CIS nations retained the top positions, although supplies by Russia dropped to 3.92 mnt from 4.18 mnt in CY’20, a decrease of over 6% on the year.
Similarly, exports by Ukraine slipped 6% year-to-year to 2.91 mnt from 3.1 mnt. Brazil, too, saw export volumes dropping to 3.25 mnt in CY’21 compared with 3.75 mnt in the preceding fiscal.
Although top supplier Russia slashed the export tariff on basic pig iron by 50% in Jul’21 to $54/t from $115/t that was initially envisaged, the export duty of 15% was retained to cool steel prices in Russia and increase supplies for the domestic end-users, especially the construction industry.
This prohibitive export duty imposed by Russia impacted exports, curtailing shipments, especially to the USA, and paving the way for other seaborne suppliers like India to ramp up exports.
Interestingly, India increased pig iron exports by over 50% on the year to 1.3 mnt from 0.86 mnt in CY’20 by catering to emerging markets such as South Korea and Turkey as well as ratcheting up shipments to traditional buyers such as the USA.
Higher merchant pig iron production, particularly in H2CY’21, supported higher export volumes, not to forget higher realisations in the seaborne market due to the breathtaking rally in met coal and coke prices on supply issues amid robust demand.
China dynamics
The dominant theme in the global steel industry in CY’21 was production curbs in China in H2CY’21 after steel production increased by 12% year-to-year in H1. China’s imports of pig iron fell 64% on the year from 5.56 mnt in CY’20 to 2 mnt last year due largely to an exceptionally high base effect.
China’s steel demand rose at a surprisingly brisk pace after the initial Covid-19 outbreak in CY’20 at a time when the rest of the world was in lockdown. Although demand fell to near-zero in the rest of the world in mid-CY’20, semi-finished steel products continued to be produced – steel being a continuous process industry. A bulk of these products was shipped to China where domestic demand had risen much faster than supply could keep pace with.
Notably, China surpassed even the USA, traditionally the largest seaborne buyer of pig iron in CY’20. Although restrictions on blast furnace steel production in China fuelled imports in CY’21, volumes fell on lower steel production.
US steel capacity expands
On the other hand, sustained recovery from the pandemic and surge in industrial activity triggered unprecedented demand for steel in the USA, thereby boosting imports. In addition, EAF steel capacity expanded by around 7% compared with CY’20 – over 7 mnt.
The US EAF market share in steelmaking is expected to rise sharply by 80-85% by CY’25 with an additional 14 mnt capacity to be announced by 2024. The USA has an annual crude steel production capacity of around 75-85 mnt.
Outlook – Global pig iron supply is threatened at this moment with Russia and Ukraine on the brink of an armed conflict. Any military flare-up can disrupt supplies from the CIS countries for an indeterminate period to the detriment of steel producers across the world, especially at a time when ferrous scrap prices are high.
The USA will have no option but to increase sourcing from other destinations, particularly Brazil, although high-phosphorous Brazilian pig iron is not ideally suited for EAFs designed to churn out steel to be rolled into flat products.
Notably, if blast furnace production in China comes under increasing restrictions even after 15 Mar’22, import demand may increase, benefitting suppliers such as India.
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