Cheap iron ore, high scrap prices to widen Southeast Asia BF-EAF billet production costs in May

Cheaper iron ore and coking prices would bring down the blast furnace route of billet production cost, while higher scrap prices are pulling electric arc furnace-based production costs in the opposite direction moving into May, according to S&P Global Commodity Insights estimates.

The spread between the average cost per metric ton of billet produced by EAF steelmakers and the blast furnace-converter route is expected to widen sharply to $76/mt in May from $59/mt in April, Commodity Insights data showed.

Estimates for May are based on April raw material prices for delivery one month forward, accounting for the BF-converter route with scrap usage of 10% and EAF scrap usage of 100%. The EAF calculation assumes a scrap yield of 89%.

The per-ton cost to produce billet via the BF-converter route is estimated at $487/mt for April, down $8/mt month on month, while EAF steelmakers are expected to see an increase of $9/mt to $563/mt.

Platts assessed the average seaborne pulverized coal injection price at $135.24/mt CFR China in April, which was lower than the March average of $142.13/mt, Commodity Insights data showed.

The average seaborne 62%/60% met coke price assessed by Platts on an FOB China basis was at $279.24/mt in April, which was also lower than the previous average of $297.58/mt in March, the data showed.

The April average for Platts 62% iron ore fell to $110.91/dmt from $109.53/dmt in March, following continued weakness and widespread pessimism about Chinese property and infrastructure demand.

For ferrous scrap, HMS 1/2 80:20 grade prices on a CFR Taiwan basis saw an increase of $8.40/mt to an average of $359.10/mt in April, while HRS101 assessment prices remained stable at an average of $390.10/mt for April, compared to $390.80/mt in March, the data showed.

EAF-based billet production is expected to face even stronger headwinds into May following seasonal summer power price hikes, although a tepid South Korean import market continues to weigh on seaborne scrap prices while higher power prices will influence Taiwanese mills to reduce production volumes, according to several trader and mill sources.

Platts assessed 5SP 130 mm billet on a CFR Southeast Asia basis at $527/mt, $3/mt higher on the day April 30 and up $15/mt month on month, according to data from Commodity Insights.