Miller on Metallics: The future of US pig iron usage

Current prices

The current prices for imported pig iron (high P), mainly from South Brazil, is about $422-28/mt CFR New Orleans. Prices have dropped about $45-50/mt since August 2024 as scrap prices drifted lower in the US. Competing offers from India have also softened the market as cheap Russian stocks have invaded South Asia and the US dollar has significantly strengthened since November.

Looking back

In the years prior to the Russian invasion of Ukraine in Q1’22, the US came to rely on Russia and Ukraine for approximately 65% of their total pig iron imports, the vast majority from Russia. Brazil had been relegated to about 30%. The reason for this unwise reliance was the phosphorous levels contained in the product. Brazil only produced around 100,000 mt per month of what is considered low P material averaging .08 P with a Max of .10% in the sub-Amazon Basin. The majority of Brazilian production is produced in several southern states about 1000 miles to the south. However, this material is considered high P averaging .13% P with Max of .15%.

The US mills and foundries wanted lower Phos material. As Brazilian production in the north decreased due to bankruptcies and ecological issues, American mills went to Russia and Ukraine for an ever-increasing amount of their needs. They almost completely wrote off the 70% share that southern Brazil produced, leaving them to market to Europe, Mexico, or make foundry grades (FPI & NPI). Typical Russian and Ukrainian pig iron has a Phos level of .05–.08% with a Max of .12%.  

So, things were doing well until the invasion and the impositions of sanctions on Russia pig iron. This shocked the US buyers as they watched their prices climb from $475/mt to $950/mt delivered to Gulf ports almost overnight. And the irony of it was their only real option was south Brazilian high P! 

Prices took a while to decline as buyers sought offers from India and even China. This whole problem occurred over the added Phos levels amounting to .05%. Some metallurgists have said this is a significant amount of Phos, but this is primarily what US mills are buying and melting today.

However, they still pay a premium for the lower P, Brazilian material, and for the occasional shipments arriving from Ukraine. The last confirmed price for Ukrainian was $470/mt CFR. Lower P material from Northern Brazil is probably somewhat cheaper.

It’s obvious the US mills haven’t given up on their quest for low P basic pig iron. So, what happens when the war is settled and international sanctions are removed. My guess is the levels of imports from the Black Sea will increase, hopefully not to the pre-war levels.

But one thing is for certain, US buyers want low Phos material. If a company decided to make pig iron for the US market as a new supplier, it had better be low P. If an organization can manufacture material with a maximum P level of .10%, you will be able to achieve a reliable trade flow, price notwithstanding.

What could happen next?

What other barriers could affect the import volumes and pricing in the US in the coming years?  While there is only a small amount of basic pig iron produced domestically, there are plans to increase this share. U.S. Steel’s Gary Works in Indiana is producing pig iron for the Big River Steel mill in Arkansas, but their capacity is only 500,000 tons per year.

The old Inland Steel, now Cleveland-Cliffs does produce a modest amount and sells it to mills and foundries. In Canada, Stelco-Cliffs can also produce pig iron depending whether it’s more profitable than hot-rolled coil (HRC).

There is a plan for the U.S. Steel blast furnaces in Granite City, Ill., to be sold to SunCoke Energy. SunCoke projects they can produce 2 million tons per year of basic pig iron there. That would take Big River out of the import market and the extra could be sold into the trade.

I haven’t seen the projected quality reports, but I can basically guarantee it will show low P.  This project is stalled currently, along with with the Nippon-USS acquisition. But this move, to produce domestic material, does make a lot of sense. If this is completed, it should concern the southern Brazilian producers and any importer with high P stocks.

Other concerns for pig iron usage center around future HBI/DRI production in North America. As of now, there is a lot of talk about increasing, but nothing firm. Pig iron is a preferred additive to the scrap charge over hot-briquetted iron (HBI)/direct-reduced iron (DRI) as most merchant material has low Fe (85-88%). There is no regular imported trade flow for merchant HBI and as long as US steelmakers value it at the same price of shredded scrap, there probably won’t be.      

Another potential headwind for pig iron use is technological innovations by scrap processors to improve the level of residual alloys in obsolescent scrap, mainly shredded. If they can get the copper levels to stay under at certain level (under .2%), they might have something. It’s hard to project how extensively this technology can be deployed and at what cost.

In summary, the North American steel market will continue to use large amounts of basic pig iron. Where the sources will be depends on both economic and geopolitical events. The emphasis will be on low P material when it becomes available either from Russia, Ukraine or domestic sources.