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

Ferrous scrap trading in the US began on Monday for April deliveries and the effect of the automotive plant cutbacks is likely to be felt on pricing due to limited scrap volumes. Auto plant cutbacks, borne out of a shortage of semiconductor chips, have created an acute shortage of industrial scrap, at a time when EAFs are running flat out and every mill in the US chases industrial scrap and high-grade metallics for their finished products.


Detroit’s mills entered the market on Monday with bids of unchanged monthly prices for industrial scrap grades while other regions are expected to trade at anywhere from sideways to up $20/gt in April, compared to March. 


When prime grades are tight in supply for over two months, mills begin to tweak their melting mixes to accommodate more shredded and P&S. Mills have also booked large tonnages of import metallics like basic pig iron to address this need.


Spreads between obsolete grades and prime grades will grow at least $20/gt wider in April to historic highs any substitution of primes with shredded or P&S scrap now will coincide with a drastic seasonal increase in the supply of obsolete grades.


As auto production returns to normal, prime grade supply may trail demand further supporting scrap prices in 2021. 


Restarts expected in April

Japanese carmaker Honda restarted production at its auto, transmission, and engine plants on Monday, around two weeks after it cut down output at all its plants in the US, Canada, and Mexico.


Other automakers are expected to resume normal production at their plants between Apr 8-12


Honda, General Motors, Ford, Stellantis, Nissan, Toyota, and other automakers have reduced or suspended production at some of their facilities in North America due to the semiconductor chip shortage and other factors such as port congestion and severe winter weather that disrupted deliveries of key components to carmakers over the past few months.


On Mar 31, Honda reported a 10pc rise in its global output in February. The automaker’s North American production, however, dropped by 17pc during that month. Its exports from Japan to North America and Europe were also adversely impacted by the semiconductor shortage.


Looking at Q2

In Q1 2021, almost all auto companies have reported increases in sales due to the rising demand for cars in an environment where consumers, driven by COVID-19 related restrictions, prefer traveling in their own vehicle instead of taking public transport.


For example, General Motors, which cut production at its Chevrolet plant in Wentzville Missouri in March at least until Apr 8 and extended the downtimes at its facility in Lansing, Michigan over the same period, reported a 4pc increase in total sales during Q1. Similarly, Ford, which cut down production in Dearborn and Cologne in Michigan through most of last month reported a 1pc increase in sales in the first quarter. However, both companies have said that the shortage would cost them over $1bn of their annual EBITDA this year.


Stellantis, which reported its quarterly sales and deliveries for the first time under the new brand name on Apr 1 after the FCA-Peugeot merger, indicated that its sales in the US increased by 5pc in the first quarter to 469,651 vehicles due to strong retail demand. The company’s sales in Canada rose by 4pc to 46,077 units.


Toyota also reported that its global production rose 6.8pc in February to 668,001 units while its sales increased by 9.2pc to 711,698 units. Still, the impact of the shutdowns of its plants in Brazil from Mar 29 to Apr 6 and a reduction in four of its North American plants during the same period is likely to impact the Japanese automaker’s sales and deliveries in the second quarter, the company noted.


The table below offers a synopsis of auto plant closures and capacities:


Mfg NamePlant NameProduction CapacityAnnual Production 2020Annual Deliveries 2020Production suspension/cutbacks
Nissan USSmyrna640,000Mar 19-22
 Canton450,000 Mar 19-22
Nissan MexicanaNMEX800,000672,700 Mar 19-23
Honda USMarysville440,000 Mar 22-Apr 5
 East Liberty240,000  
BMW   379,000 
 Spartanburg, USA361,365  
 San Luis Potosi, Mexico175,00056,081  
 Araquari, Brazil8,400  
FordUSA  1,393,334 
 Dearborn, Michigan350,000238,510 Mar 1- 22 
 Flat Rock, Michigan240,00072,793 Mar 1- 22
 Kansas City550,000374,248  
 Louisville, Kentucky400,000224,721 Mar 1- 22
 Kentucky Truck Plant480,000398,556 Mar 1- 22
 Wayne, Michigan200,00091,778 Mar 1- 22
 Mexico 560,141 
 Hermosilla 300,000   
General MotorsUSA  2,547,339 
 Bowling Green, Kentucky67,00022,076  
 Fairfax320,000138,689 Mar 3 onwards
 Flint, Michigan266,000219,506 Mar 3 onwards
 Fort Wayne, Indiana 330,000278,906  
 Lansing Delta 290,000178,625 Mar 3 onwards
 Lansing Grand River100,00059,098 Mar 3 onwards
 Lake Orion160,00041,272  
 Spring Hill200,000144,393  
 Wentzville348,000192,047 Mar 3 onwards
 Canada   218,501 
 CAMI, Ingersoll250,000128,497 Mar 3 onwards
 Mexico   Mar 3-Apr 5
Toyota (Americas & Canada)USA 1,003,753 Mar 29-Apr 6
 Missouri2,700,000 cylinder 
 Tennessee1,700,000 engine blocks 
750,000 transmissions
 West Virginia1,000,000 engines and 
 Canada  427,320  
 Mexico 169,314  
 Brazil 116,001 Mar 29-Apr 6
 Argentina 93,252  
 Venezuela 75  
VolvoSouth Carolina150,000110,000 
VolkswagenBrazil   Mar 24-Apr 4 


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