China resumes exporting pig iron to the US in absence of supplies from CIS

After a pause of seven years, China has recommenced exporting basic pig iron to the United States where the market is in desperate need of preliminary iron and steel products to fill a supply gap, market sources in Shanghai said on March 25.

A deal involving 70,000 tonnes of China-origin pig iron was heard to have been concluded with a US buyer early this month at around $1,000/tonne CFR, according to two market sources. The news is circulating widely in China's steel market, though both the seller and the buyer remained unknown, as "they are not willing to overly expose the deal," said a Shanghai-based exporter of ferrous products.

"These days, merchant pig iron producers in many parts of China have been receiving quite a few inquiries (for exports), with some deals currently under negotiation," another source based in North China's Shanxi province echoed. "But they tend to keep things very confidential," she admitted.

China discourages the export of preliminary iron and steel products and imposes a hefty 20% export tax on it, the main reason why Chinese pig iron exports have remained very low over recent years, domestic market sources noted.

In 2021, China's pig iron exports totaled only 87,309.5 tonnes, while pig iron shipments to the US had remained at zero since 2015, the Customs statistics show, until now.

The current shortage of the commodity in the US currently and the sky-high prices basic pig iron enjoys in the local market made the export business profitable and feasible for Chinese shippers, despite the tariffs and soaring ocean freight rates, the sources indicated.

As of March 25, the price of Chinese pig iron used in steelmaking stood at only Yuan 4,160/tonne ($654/t). For this latest deal then, even adding with 25% tariff and around $80-90/t for freight, it "can still make the seller a considerable profit," the Shanghai exporter commented.

"The US is short of such preliminary iron and steel products, because of the reduction of supply from Russia at the moment. So, US traders and steelmakers are buying from almost everywhere including Brazil, EU and Japan, as well as China," he said. Previously, Russian had been shipping "up to millions of tonnes (per year)" to the US, he added.

But the "abnormal" price disparity between the US and China for the commodity suggests that it's likely exports of Chinese pig iron across the Pacific will only be temporary, according to him. "The window will close around June, when we expect the supply shortage in the US to have been gradually resolved," he said.

Written by Olivia Zhang, zhangwd@mysteel.com

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.