Issue 45, 2023 - This week's editorial: The threat of sanctions impacts Black Sea pig iron trade

The rise in scrap, iron ore and hot rolled coil prices amid a notable demand absence from end-users, specifically in the EU and Turkey, has impacted overall demand for pig iron.

Reports regarding potential EU measures on Russia-origin pig iron have led some customers to delay their purchasing decisions, even though they are doubtful about the likelihood of such an imposition due to its negative impact on EU industry. Some market participants suggest this announcement might prompt immediate purchases in the EU, assuming the usual grace period would be provided. However, this assumption remained unconfirmed as no deals were reported, contributing to increased uncertainty surrounding price trends.

In Russia, the additional burden resulting from the export duty, coupled with the strengthening of the rouble, has reportedly increased the pig iron breakeven point to approximately $380-400/tonne fob Black Sea, according to Russian producers.

The exchange rate signalled a duty at around 5.5% for December and potentially 4.5% for January, according to market participants’ estimates. The export duty is at zero if the exchange rate is at RUB 80/dollar or lower, 4% if at RUB 80-85; 4.5% if at RUB 85-90; 5.5% if at RUB 90-95; and 7% if over RUB 95.

In Italy, quotes from Russian producers were at $395-415/t cfr, whereas the most recent transactions were recorded at $380-390/t cfr for end-December boarding. Italian mills are buying limited volumes at around $410/t delivered from distributors. The stronger euro against the dollar could enhance the material's attractiveness.

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