Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

US steel mills and scrap providers continue to make temporary changes, following the slowdown in manufacturing brought on by COVID-19.


All steel producers will be affected by their major customers—such as vehicle manufacturers—taking a pause. Several companies have begun responding to the stoppages though electric arc furnaces could be less impacted than integrated mills that produce more than half of automotive sheet in the US. Prime scrap availability will also be altered by the auto shutdowns.


Market participants informed Davis Index that AK Steel in Dearborn, Michigan will no longer receive inbound ferrous scrap starting March 23 until further notice. 


A suspension in scrap receipts went into effect at close of business on Friday at Gerdau in Ft. Smith, Arkansas on concerns over the temporary shutdowns announced by the three big car manufacturers earlier in the week. Suppliers have been notified they may complete unfinished March ferrous contracts when the Gerdau plant resumes scrap receipts. The notification did not mention when it would restart operations.


Nucor Steel in Jewett, Texas also updated suppliers on Thursday that it will stop receiving inbound scrap shipments for an indefinite period.


Aside from reduced needs at mills, the recent announcements are also related to local policy mandates that necessitate reduced or removal of contact between scrap delivery drivers and employees receiving material at the yards and scales.


Integrated steel mills in the Midwest area began discussing pre-plans for handling excess hot metal, such as beaching, should the need arise but no formal announcements were made until the time of publishing this article.


Last week, some steel mills were looking for small amounts of additional material at modest price decreases compared to March settled prices. Mills report they still have need for scrap although requirements and activity slowed substantially this week. However, demand levels are scattered and are being determined. A market participant in the Midwest, that spoke with Davis Index, remains optimistic after receiving a supplier request for an increase in current orders and stated that business is still active.


Pennsylvania’s governor suspended all non-life sustaining businesses in the state but exempted steel mills as state agencies deem them essential. Those not covered under the exemption are construction and fabricated metal industries. Similar orders were announced or are in the process in other states, such as Illinois, New York and California that implemented a “shelter in place” policy that could impact incoming scrap flows, which depend on business remaining essential.


The market uncertainty and steps being taken by the state governments and by steel mills and scrap yards have resulted in prices are dropping rapidly on the East Coast. For instance, export yards have lowered collection prices for HMS 1&2 (80:20) to $160-170/gt and shredder feed is down to $125/gt delivered Philadelphia docks. Three days ago, on March 17, HMS 1&2 (80:20) was around $193/gt delivered East Coast dock, and shredder feed was $143/gt delivered.


Dock prices are expected to decrease further by April 1. There is also talk of possible layoffs at several scrap yards. 


In the South, shredder feed values decreased by $20/gt in Texas. Georgia yards have decreased shredder feed by $30/gt, starting with $10/gt decreases on March 19, and the remaining $20/gt decreases expected next week. A seller in the St. Louis and Northeast Arkansas region is also reported to have aggressively sold material into the March market to carry little inventory going into April with the idea of improving flow for inbound scrap during the month.


Some dealers in the US need shredder feed tons to complete March orders that are not postponed or cancelled. A few, hoping to gradually increase flow as planned, have announced they will not drop scale prices until enough material is received.  


The current crisis is different from previous low-steel demand situations in that, this event is being countered by lower feedstock material. However, shredders throughout the US announced scale price drops late this week, ranging from $5-40/gt.


Market sentiment regarding the upcoming April ferrous scrap trade projects declines of $50/gt. However, some have expressed that drops of that amount would be a good thing and wonder if pricing will decrease further.

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