Global pig iron trade drops over 20% in CY’22 amid changed trade flows

• Volumes from Russia-Ukraine drop
• US reduces pig iron imports, increases scrap usage
• Export tax removal offers greater exports scope to Indian players

Morning Brief: Global pig iron trade dropped 21% to 9.2 million tonnes (mnt) in 2022 against 11.7 mnt seen in the preceding year, as per provisional data available with SteelMint shows.

Key reasons behind the drop  

1. Exports from Russia-Ukraine drop: Russia and Ukraine were the top (4 mnt) and third largest (3 mnt) exporters of the material in 2021. Combined, they held a leading share of 58% in global pig iron exports in 2021, SteelMint data shows. However, with the onset of the war, trade dynamics changed. Exports from both countries were disrupted. Russia faced western sanctions which did not allow it to export while Ukraine was impacted by logistic and other challenges. In 2022, volumes from both countries fell substantially, dragging down overall pig iron imports globally.

2. India’s exports impacted by duty: The country exported 1.3 mnt in 2021. However, these plunged to 0.50 mnt in 2022, impacted by the 15% export duty slapped in May last year. This had hit realisations and made exports unviable.

3. Sharp drop in US imports: The US is traditionally the largest importer of pig iron globally. In 2021, the import volumes were at over 6 mnt. However, data shows, these dropped 26% to 4.50 mnt last year. Obviously, with the leading importer reducing its volumes, the overall quantity was impacted. A key reason behind the reduced volumes lay in the fact that the US had brought sanctions against Russia and imports from the latter were thus impacted. It turned to sourcing from Brazil. Plus, the US increased its scrap usage at the cost of pig iron.

4. Volumes from China, Bangladesh reduces That apart, China and Bangladesh showed a drop each. China’s volumes dropped y-o-y by 44% to 1.11 mnt (1.99 mnt in 2021) and Bangladesh’s plunged 60% to 0.03 mnt (0.08 mnt). China lessened imports because of the Covid surge, production cuts and overall drop in demand from the real estate sector. Bangladesh faced impediments in opening new LC accounts because of its foreign exchange crisis.

Outlook  

Global seaborne volumes of pig iron may increase in 2023 as macro economic factors look improving.

Secondly, with the export tax lifted, Indian players are encouraged to explore overseas sales. A 50,000-tonne cargo was recently concluded by a western India-based player and exporters are upbeat that more deals could happen in the near future. Moreover, Indian exporters are further keen to export as they feel, with global ferrous scrap prices on an uptrend, pig iron export offers will also rise.

Thirdly, if China’s blast furnace-route steel production faces increasing curbs, producers there may be compelled to import and this can benefit Indian exporters.

On the other hand, Brazil, the second-highest exporting country, is looking to shut down 50% capacity for maintenance till March, 2023. But, many feel, India may not benefit from this as its pig iron has phorphorus content in excess of 0.12% and needs to be blended with higher grade material for obtaining greater yield. At current prices, material from Brazil and even Ukraine offers greater viability. Current Black Sea region offers are hovering at $390/t FoB while India’s domestic steel grade pig iron prices, ex-Durgapur, are touching INR 44,200/t ($539/t).