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What Factors Affect the Price of Pig Iron?

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  • Written By: B. Turner
  • Edited By: Rachel Catherine Allen
  • Last Modified Date: 03 September 2016
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Pig iron is a raw material used in the production of steel, wrought iron and cast iron. It consists of iron ore that has been enriched with carbon to improve properties like strength and malleability. Changes in pig iron prices can have a ripple effect across the entire economy, and may impact everything from the price of building materials to cars and consumer goods. Like most goods, pig iron prices are largely determined by supply and demand for this material. Other factors which affect the price of pig iron include tariffs and taxes, or artificial changes caused by speculators and similar market forces.

Demand for iron ore and related products represents one of the major factors affecting the price of pig iron. In times of high demand, prices rise, while periods of low demand generally lead to lower prices for this good. For example, building booms in Asia during the late 20th and early 21st century caused prices for steel and pig iron to increase dramatically. As construction activity declines, demand for pig iron decreases, leading to lower prices for this commodity.

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The supply of iron ore can also have a tremendous impact on the price of pig iron. Shortages of iron ore may restrict supply, leading to sharp price increases. Changes in technology can also impact supply, and thus price. For example, the introduction of a new mining technology that makes it easier to extract and process iron ore will generally result in greater supply and lower prices. Improvements in labor and employee skills in this industry may also help improve supply and lower the price of pig iron. Any natural disasters that make it more difficult to extract or locate iron ore will usually cause prices to rise.

Legal factors, such as international laws, tariffs or taxes can influence pig iron prices as well. Countries that set high import or export tariffs or goods like pig iron can cause prices for this good to rise, even when supplies are relatively high. Legal limits on export or import quantities can also increase the price of pig iron.

Like many other raw materials, such as sugar and salt, pig iron is considered a type of commodity. This means that shares of this good are traded on the commodities market just like stocks and other investment instruments. Speculators and investors can influence global prices and manipulate the market through certain purchase strategies. These types of price manipulations don't necessarily reflect the true value for these goods, and are often short-lived.

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