Pig iron price rally loses momentum; downside risks may emerge in the mid-to-late September market
Driven by cost support in early September, pig iron prices rose, yet weakening demand capped gains and slowed the upward trend. Looking ahead, costs and demand will continue to compete. Some ironworks may accept orders in advance and offer hidden price cuts to boost transactions. The pig iron market may face downside risks in mid-to-late September.
Pig iron price rally slows in early September
Domestic pig iron prices edged higher overall in early September but the upward pace gradually moderated. The rally was mainly underpinned by strong cost support from successive coke price hikes, coupled with low ironwork inventories. However, downstream end-user demand saw limited improvement. The widening price spread between pig iron and scrap iron eroded the purchasing advantage of pig iron. As market bullish sentiment faded, upward price momentum weakened.
As of September 10, the daily average price of Chinese foundry pig iron stood at RMB 3,087.94 per tonne, up 0.75% month-on-month. The daily average price of ductile iron in China reached RMB 3,133.75 per tonne, rising 0.64% month-on-month.
Successive coke hikes drive price gains
The 4th and 5th rounds of coke price increases were implemented in early September with substantial gains. Iron ore prices surged then retreated, pushing raw material costs higher, and most ironworks operated with negative margins. Strong cost floors discouraged ironworks from cutting prices to clear stocks, forming the core driver of the current rally.
As of September 10, domestic pig iron costs climbed from the start of the month. Current ironmaking cost in Hebei is RMB 2,821 per tonne, up RMB 109 or 4.01% month-on-month. The foundry iron cost in Hebei now stands at RMB 3,257 per tonne, an increase of RMB 110 or 3.5% month-on-month.
Supply remains stable while weak demand curbs price gains
On the supply side, ironwork operating rates ticked up and output saw a mild increase. Order intake slowed in early September, but ironworks had secured ample orders previously, so no obvious inventory build-up was observed. Ironworks faced little pressure to destock. No significant selling pressure emerged on the supply side to weigh on prices. Overall, the relatively tight supply balance remained intact, providing bottom support for pig iron prices.
On the demand side, downstream foundries received few orders with no tangible demand growth from end users. Downstream firms adopted a conservative hand-to-mouth purchasing strategy. Meanwhile, scrap iron prices rose less than pig iron, further widening the pig iron-scrap price spread and weakening the cost-performance of pig iron, which suppressed downstream buying interest. Cooling market demand and fewer transactions directly slowed the pig iron price rally.
Inventory data from a survey covering 17 sample enterprises: as of September 11, surveyed ductile iron inventories totalled 266,000 tonnes, down 11,000 tonnes from the start of the month.
Pig iron prices likely to consolidate in mid-to-late September
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From the supply perspective, heavy cost pressure and negative margins dampen production enthusiasm. Some ironworks under maintenance show little willingness to resume operations; only a handful plan restart in mid-September. A few ironworks intend to carry out maintenance but have not finalized timelines. Slower transactions may trigger inventory accumulation. It is estimated that output will fluctuate at stable levels in mid-to-late September with a high probability of inventory build-up.
For demand: although the traditional peak season has arrived, the foundry sector shows no marked recovery. Downstream orders remain tepid, and buyers maintain hand-to-mouth raw material procurement. In addition, the price spread between pig iron and scrap iron persists, scrap iron lacks upward momentum, and pig iron’s cost advantage weakens. Downstream buyers only purchase pig iron to meet rigid needs. Demand will likely stay at rigid consumption levels in mid-to-late September.
In terms of costs: expectations for the traditional peak season plus the Mid-Autumn Festival and National Day holidays may bring marginal improvement to steel mills’ coke demand. Coke prices are expected to stay volatile and firm in the short run. Squeezed steel mill profits may drag iron ore prices lower. Overall, pig iron costs will remain under pressure in mid-to-late September and continue to support prices.
Other factors: bullish market sentiment has cooled. With the Mid-Autumn and National Day holidays approaching, some ironworks may take orders in advance to avoid inventory build-up. Traders still hold decent profit margins and are expected to actively accept orders to realize profits. Manufacturers may adopt hidden price cuts to facilitate deals in mid-to-late September.
In summary, the market may enter a phase of tug-of-war between costs and demand. Considering some ironworks will advance order intake ahead of the dual holidays with potential hidden discounts, downside risks may hit the pig iron market in mid-to-late September.
The average price of Chinese foundry pig iron is projected to move within RMB 3,030–3,100 per tonne, and ductile iron in China is forecast to trade at RMB 3,050–3,150 per tonne.