The 50% U.S. import tariff set to take effect at the beginning of August is seen as a turning point, one that will reshape not only prices but also trade routes.
Growing Uncertainty on the Brazilian Side
In 2024, Brazil exported 87% of its total pig iron output to the United States. With the new tariff introduced by the U.S. administration, Brazil now faces a serious risk of losing its primary market. The fact that only one shipment has been made since July 9 underscores the risk of a market collapse.
Producers are turning to various defensive strategies in response to the crisis. Major producers have brought forward maintenance operations to reduce output, while others are trying to gain time by liquidating their inventories. Both approaches are putting pressure on the market, voluntary supply cuts might bring short-term price stabilization, but their sustainability remains questionable.
Prices Remain Stagnant, Buyers Stay on the Sidelines
For pig iron sold with FOB delivery at Brazilian ports, prices have remained stuck in the $400–405/ton range over the past two weeks. European buyers show little interest at these levels, which further weakens the position of South American producers.
However, offers to the U.S. have reportedly climbed to as high as $430/ton FOB, driven by anticipated recovery in the flat steel segment. Still, these offers are unlikely to gain lasting momentum before the new tariffs take effect.
Expectations Rise in the U.S., But Trading Activity Remains Low
CIF transactions at East Coast U.S. ports continue to hover in the $440–445/ton range, with minor adjustments. For August shipments, producers are aiming to secure deals at $450–455/ton. However, confirmed transactions at these levels have yet to surface in the market.
While potential price increases in flat steel are expected to stimulate pig iron demand, the stagnant trade volumes and the summer slowdown in market activity are delaying this effect.
Can a Supply Crisis Turn Into an Opportunity?
The steep tariff wall imposed by the U.S. is pushing Brazilian producers to seek out new markets. Another potential response is to reduce production as a form of damage control.
With weak demand from Europe, reliance on the U.S. grows even more. However, this dependency rests on a fragile balance vulnerable to political decisions. Meanwhile, declining supply from Ukraine could open short-term windows of opportunity for certain buyers. Whether that window remains open depends largely on how quickly and effectively Brazil can establish new trade routes.
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