Ferrous this week: Davis Index

Here’s a summary of our global ferrous coverage this week.

Turkey

• The daily Davis Index for Turkish imports of US-origin HMS 1&2 (80:20) increased by $5/mt to $255/mt cfr on Friday.
• The gap between bids and offers narrowed at the end of the week amid ongoing negotiations in the Turkish ferrous scrap market. Offers remain at a minimum of $260/mt cfr for HMS 1&2 (80:20) from the USA or the Baltic region despite some mills, who are short of the material, raising bids to $250/mt cfr. Some bookings are anticipated above these bid prices, because offers are scarce.
• Purchases of short-sea scrap cargoes continue in Turkey with a supplier from the Adriatic Sea basin selling HMS 1&2 (75:25) at $245/mt cfr Marmara.
• Turkish mills in Izmir raised purchase prices for domestic shipbreaking scrap by $5/mt to $250/mt delivered on Friday. As a result, prices increased by $45/mt, compared to the beginning of the week, on improved demand and more expensive imported material.
• Local rebar spot prices slid by TRY10/mt ($1/mt) in Turkey, and settled at TRY3,220-3,270/mt ex-works, including 18pc VAT, on Friday, while export rebar prices increased by $10/mt to $410-420/mt fob. ($1 = TRY6.69)

US ferrous 

• US domestic ferrous scrap trading kicked off mid-day Tuesday when two of Detroit area’s five major mills announced an April price decrease of $30/gt for prime grades and $50/gt for shredded and cut grades because of reduced melting requirements.
• Gerdau’s idled mills in Monroe and Jackson, Michigan are expected to resume by April 20, although that date could be pushed.
• Sellers reported little yard inventory and have no expectation of April inbound material increasing due to low prices and industry stoppages. 
• Several mills are taking outages, using internal inventories, or have no April buying programs—and many have had steel order cancelations. Many scrap dealers across the US are closed to the general public, while flow from prime generation—which mainly comes from manufacturing, like the automotive sector—has dropped by 30-100pc.
• In some regions, trading is taking place at $30-45/gt decreases compared to March. The South, which is softer, is slated to begin trading on Thursday, with expectations of a $50/gt decrease for obsoletes and little, if any, demand for prime.
• Unexpected resumption of buying activity from Turkey has added an optimistic facet to market dynamics this week. Settling expected early in week of April 11.
• Market participants surveyed informed prime grades moved in week at declines of $10-30/gt, depending on region, with obsoletes at declines of $40-50/gt. Some reported foundry prime grades trading sideways compared to March settlements.
• In Canada, Dofasco entered the market early on Thursday announcing price decreases of C$22/nt ($17.64/gt) for prime grades and C$51/nt ($40.88/gt) for secondary materials. However, market participants indicate, sellers have not confirmed sales at those levels. ($1 = C$1.40)
• Canadian mills have also reduced their melt programs and can use their inventories to cover light order books.
• Ivaco rolling mill first announced its L’Orignal plant in Canada would cut production by April 28 because of waning market conditions, overcapacity, and tariffs adversely affecting exports to the US. The mill has an annual steel billet output capacity of 625,000nt and wire rod capacity of 900,000nt. 
• Ivaco’s melt shop was idled over the weekend, and while resumption dates have been set at April 13 and April 20 for the rod shop, the shutdowns could be extended. The company also recently announced temporary and permanent layoffs. According to market participants, most of the staff, save for managers, have been made redundant.
• Economics seemingly support price renewal, with inbound scrap flow taking the hardest hit because flow is considered much weaker than demand. Some steel mills are still running well, like ArcelorMittal Weirton’s tin plate operations, mills outside of special bar quality plants, and oil country tubular goods plants—despite COVID-19. 

US: Pig iron import prices trend flat

• The weekly Davis Index for basic pig iron (BPI) was flat on Thursday at $324/mt cfr New Orleans amid weak demand and supply tightness.
• China is actively purchasing available CIS-origin BPI material at$270-275/mt fob (equates to about $293-303/mt CFR), according to sources. However, CIS suppliers are expecting to see a price recovery by next week along with scrap prices.
• Activity from China is leaving tight supply and low obtainability for the US market. Producers have been offering BPI to the US since March 26 at $320-330/mt cfr Nola.
• The index for nodular pig iron (NPI) imports is flat at $418/mt cfr Nola, with no new sales this week. The last offers heard declined to $405-430/mt cfr Nola from $430-440/mt cfr Nola, with no confirmed bids at that level. 
• The weekly Davis Index for US hot briquetted iron (HBI) imports remained unchanged at $254/mt cfr New Orleans. No HBI import deals to North America were reported this week, nor was the material reportedly moving to other locations.

US: Dock buying prices mixed (Apr 7)

• US East Coast dock collection prices for ferrous scrap rose for some grades and dock locations and remained unchanged for others amid resumption of activity from Turkey and scrap supply tightness. India continues with the lockdown for one more week. 
• Sellers told Davis Index, they received a few quotes on April 7 for HMS 1&2 (80:20) at $150/gt or more as material is currently loading at a Boston dock. Sales at new price levels have not been confirmed as some sellers are waiting to see if offers rise further. Market participants opine that export yards will hold at current prices for as long as possible.
• The Davis Index for export yard buying prices in New York for HMS 1&2 (80:20) was flat at $138/gt delivered on Tuesday and remained unchanged at $148/gt delivered New York dock for P&S 5ft. The index for shredder feed held at $102/gt delivered. 
• In Los Angeles, the Davis Index for HMS 1&2 (80:20) dropped by $4/gt to $139/gt delivered, while the index for P&S 5t was flat at $154/gt delivered, and the index for shredder feed decreased by $9/gt to $88/gt delivered. Dock buying price declines were announced on April 1, but whether or not there were actual declines was contingent on relationships with the dealers. While the other two scrap grades declined compared to last week, P&S 5ft remained unchanged as Asian buyers show a preference for better grades.

Mexico: Ferrous scrap prices unchanged

• Mexico domestic ferrous scrap prices remained unchanged for most grades on Friday despite tight supply.
• In the northern region, the weekly Davis Index for HMS 1&2 (80:20) was flat to MXN5,800/mt ($247.6/mt) delivered Mexico consumer on Friday. The index for machine shop turnings remained unchanged at MXN4,900/mt delivered and rose by MXN100 for #1busheling to MXN5,900/mt delivered. The index for P&S 5ft in the north increased by MXN100/mt to MXN5,800/mt delivered Mexico consumer.
• The Davis Index in the Bajío region rose by MXN17/mt to MXN5,800/mt delivered Mexico consumer for HMS 1&2 (80:20), but remained unchanged for machine shop turnings to MXN5,000/mt delivered. The index for #1busheling rose by MXN10/mt to MXN6,000/mt delivered and increased by MXN33/mt to MXN5,700/mt delivered for P&S 5ft.
• In the central region, the index rose by MXN50/mt to MXN5,750/mt delivered Mexico consumer for HMS 1&2 (80:20) and was flat for machine shop turnings at MXN4,900/mt delivered. The index for #1 busheling in Central Mexico increased MXN100/mt to MXN5,900/mt delivered on Friday but held at MXN5,800/mt delivered for P&S 5ft.
• Mexican recyclers expect lower scrap collection in the three regions of the country due to restrictions related to COVID-19 containment. ($1= MXN23.43)

Europe (April 7)

• The weekly Davis Index for HMS 1&2 (75:25) in the ARAG region increased by €23/mt ($25/mt) to €170/mt delivered dockside on Tuesday, as market sentiment improved.
• European ferrous scrap suppliers have raised dockside prices because demand and export trading activity have risen. A seller from Belgium achieved a significant price increase in Turkey, selling 10,000mt of HMS 1&2 (75:25) for $235/mt cfr, 20,000mt of shredded scrap for $243/mt cfr, 4,000mt of P&S at $248/mt cfr, and 6,000mt of busheling at $253/mt cfr on April 3. Turkish buyers are active this week and exporters intend to achieve higher prices on their next deals.
• However, ferrous scrap collection in the Netherlands and Belgium remains sluggish because of the automotive industry and demolition sector slowdowns, which were caused by COVID-19. As a result, there is limited availability of European cargoes for export. (€1 = $1.09)

UK

• The weekly Davis Index for north UK HMS 1&2 (80:20) ferrous scrap declined by £24/mt ($30/mt) to £107/mt delivered dockside while the index for south UK HMS 1&2 (80:20) fell by £15/mt to £100/mt delivered, on tight domestic supply.
• Flailing ferrous scrap demand in key export markets is now superseded by a domestic “supply shock”, given UK’s merchant scrap market has all but completely ceased collecting and trading in response to stringent nationwide “stay-at-home notices”.
• Major UK ferrous scrap processors still operating under “essential” worker status have also witnessed a dramatic decline in volumes across the weighbridge because of more stringent manual and physical handling criteria and social distancing measures.
• The monthly Davis Index for UK 1&2 ferrous scrap plummeted by £57/mt to £113/mt delivered mill and fell by £60/mt ($74/mt) to £123/mt delivered for 3B, following the conclusion of mill-yard negotiations in April.

Spain

• Davis Index’ weekly northern Spain HMS 1&2 (80:20) and shredded ferrous scrap small bulk indices climbed by €28/mt to €208/mt ($228/mt) and €213/mt cfr, respectively, on Friday.
• The recent increase in indicative bid and offer levels largely follows the significant hike witnessed in major ferrous scrap trade routes, particularly to Turkey, over the past couple of weeks.
• Spanish steel mills were only legally permitted to resume commercial production last week following the reversal of a controversial royal decree and have since been tentatively looking for offers.

Japan

• Japanese ferrous scrap export prices continued to drop as uncertainty prevailed due to the COVID-19 outbreak and resulting shutdowns. The government imposed a state of emergency in Osaka, Tokyo, Fukuoka and other major provinces on April 7. Firms have asked their employees to work from home and scrap collection rate has been hampered significantly. Weakened end user demand forced mills to idle their furnaces.
• Japan’s monthly scrap export tender, Kanto Tetsugen concluded on April 9 with average bids down by JPY1,999/mt ($18/mt) from the prior month. The tender sold a total of 20,200mt ferrous scrap, with the average winning bids at JPY20,656/mt ($190/mt) fas Tokyo Bay compared to JPY22,655/mt ($208/mt) fas Tokyo Bay on March. Fourteen companies participated in the tender and shipments are to be done by May 31.
• Japanese yards offered #2 HMS at JPY19,500-20,000/mt fas Tokyo bay with its index settling at JPY19,500/mt fas Tokyo bay, unchanged from the prior week. The Davis Index for HS and shredded scrap settled unchanged at JPY22,250/mt and JPY22,000/mt fas Japan, respectively. Japanese yen depreciated to JPY108.85 against US$1 on Wednesday from JPY107.30 in the prior week.
• Following drop in average bids for Kanto’s monthly export tender, Tokyo Steel lowered ferrous scrap purchase prices by JPY500/mt at two of its works, Tahara and Utsunomiya effective April 11. Bids for #2 HMS delivered Utsunomiya in Kanto region and Tahara in central region dropped to JPY18,500/mt and JPY19,500/mt, respectively. Bids remained unchanged at other three works since March 28. Bids are at JPY17,500/mt ($163/mt) del Kyushu plant, at JPY18,500/mt and JPY17,500/mt delivered Okayama and Takamatsu centre. 
• Japan’s crude steel output is forecast to fall 25.9pc in the April-June quarter as COVID-19 weakened demand, according the Ministry of Economy, Trade and Industry (METI). Due to a sharp decline in demand from three major consuming sectors, construction, automobile and shipbuilding. 

Taiwan

• Imported ferrous scrap prices in Taiwan were supported by prices rebounding in Turkey. Local ferrous scrap suppliers refused to offer material at lower prices. 
• Domestic HMS 1&2 (80:20) in Taiwan rose by NT$300-500/mt in the late week in South. 
• In container markets, the weekly Davis Index for containerised US origin HMS 1&2(80:20) settled at $202/mt cfr Taiwan on Thursday, down by $4/mt. Trades for containerised HMS 1&2 (80:20) concluded at $200-203/mt cfr Taiwan early in the week. Offers from suppliers were in the range of $205-208/mt cfr Taiwan late in the week, following an upturn in Turkish bulk scrap markets. Bids, however, were at $195-200/mt cfr Taiwan. US-origin containerised shredded was offered at $215-220/mt cfr Taiwan with no bids in the markets. 
• The Davis Index for Japanese HMS 1&2 (50:50) in small bulk cargoes settled at $211/mt cfr Taiwan, down by $12/mt from the prior Wednesday. Mills booked HMS 1&2 (50:50) in small bulk cargoes at $210/mt cfr Taiwan. On Wednesday, offers, however, rose to $215/mt cfr Taiwan with expectations of upward movement in global ferrous scrap. 
• Global billet prices remained under pressure with increasing competition among steel makers in India, Russia and China to liquidate inventories. Southeast Asian buyers booked billet at $365-370/mt cfr from these suppliers, down $10/mt from the prior week.

South Korea 

• Dongkuk Steel is booked 12,000mt of #2 HMS at JPY19,500/mt fob Japan, down by JPY1,000/mt from offers in the prior week. The steelmaker also booked Russian A3 grade scrap late last week at $210/mt cfr South Korea. 
• Another Korean producer booked 20,000mt Russian A3 at $209/mt cfr South Korea, taking prices down to a three-year-low. 
• The weekly Davis Index for containerised shredded settled at $225/mt cfr South Korea, down by $3/mt. 
• On April 10, Hyundai steel placed bids for Japanese #2 HMS at JPY18,500/mt fob, down by JPY500/mt from the prior week. Sellers walked away from those numbers. It also placed bids for other grades with HMS 1&2 (50:50) at JPY19,000/mt, Busheling at JPY21,000/mt, HS and shredded at JPY21,000/mt on fob Japan, respectively. 
• To save overall input costs amid falling finished steel prices steel mills cut domestic purchase prices for ferrous scrap by another KRW10,000/mt this week. Effective April 7, Dongkuk Steel cut scrap purchase prices by KRW10,000-15,000/mt delivered Pohang plant. Other steelmakers like Korean Steel and YK steel lowered prices by KRW10,000/mt this week and few cuts are likely to be effective in the next two weeks. 

Vietnam 

• An Australian yard sold a bulk cargo comprising HMS 1&2 (80:20) at $237/mt cfr Vietnam to a steel mill in the southern region. A southern mill booked a Japanese cargo comprising #2 HMS at $210/mt cfr Vietnam, down by $3/mt from the prior week. 
• Offers for #2 HMS in small bulk cargoes were at $215-220/mt cfr South Vietnam and at $225-230/mt cfr in the northern region, with very thin trades at those prices. Japanese HMS 1&2 (50:50) in small bulk cargoes was offered at $220/mt cfr Vietnam but a few bids were at $215/mt cfr Vietnam.
• On April 7, 3,000mt of HS scrap equivalent to P&S was traded at $254/mt cfr South Vietnam, down $5/mt from the prior week’s offers. Offers for HS scrap were in the range $260-265/mt cfr north Vietnam, with no takers. 
• Hong Kong-origin HMS 1&2 (50:50) in bulk traded at $225-230/mt cfr North Vietnam, but bids for the same in the South were at $210-215/mt cfr Vietnam. Vietnam container market remained flat with very limited trades concluded this week. 

Indonesia

• Indonesian mills remained silent due to a mismatch between offers and bids this week. Also, the spread of COVID-19 in the southeast and far east regions brought uncertainty to ferrous markets. Some traders turned active for bookings following increased prices in Turkish bulk markets, fearing tightening supply will push prices upward in the near term. 
• The Davis Index for containerised P&S 5ft settled at $238/mt cfr Jakarta, unchanged from the prior week. US-origin P&S in 40-foot containers were offered at $245-250/mt cfr Jakarta.

The Davis Index for containerised shredded settled at $235/mt cfr Jakarta, up by $1/mt from the prior week, though bids from mills were at lower levels of $220/mt cfr Jakarta. Suppliers refused to sell below $240-245/mt cfr Jakarta, said a trader.

China 

• The weekly Davis Index for domestic HMS 1&2 (80:20) settled at CNY2,525/mt ($358/mt) inclusive of 13pc vat delivered to mill in eastern China. Chinese steelmakers are looking to save their input costs amid falling finished steel prices in the domestic and export markets. A few mills opted to cut their purchase prices for ferrous scrap. 
• Shagang Steel lowered prices by CNY200/mt this week. Effective April 7, prices for #2 HMS are at CNY2,330/mt del Jiangsu plant, down by CNY130/mt from April 4 and down by CNY200/mt from the prior week’s prices, inclusive of the 13pc VAT as per a Davis Index source. 

Thailand 

• Thailand’s domestic scrap prices fell by over $40/mt in the last two weeks due to weak global cues and subdued domestic steel demand. Thailand also continues to be under lockdown like many other countries in the world. 
• The weekly Davis Index for domestic HMS 1&2 (80:20) settled at THB7250/mt ($221/mt) delivered Rayong inclusive of taxes, down by THB300/mt ($9/mt).

India

The outlook for steel demand remains bleak in the current lockdown situation across India. Mills were active in liquidating their finished steel and billet stocks with aggressive bids this week. No manufacturers were in hurry to buy imported scrap cargoes this week.

• The weekly Davis Index for containerised shredded increased by $15/mt to $253/mt cfr Nhava Sheva on Thursday. Shredded in containers was offered at $260-265/mt cfr Nhava Sheva, but no buyers or traders were confirmed at those levels. 
• A shortage of domestic scrap is anticipated in the coming days on a significant drop in generation rates from demolition and manufacturing activities. Ship breaking operations have also been shut this week with the country restricting beaching of vessels at Alang. These indicators and a drop-in bulk vessel import volume in the first quarter of 2020 could likely create lower domestic availability.
• South Asian markets remained in lockdown with concerns surrounding end-user demand deepening. Steelmakers have currently scaled-down production and hence, demand for imported scrap remains subdued. However, a short supply of scrap kept the prices on an upward curve. While Bangladesh saw limited trades, India and Pakistan stayed away from any major purchases.

Bangladesh

• Bangladesh’s major steel mills continued operations. If the rising COVID-19, cases, however, do not come under control, shutting down is likely to be inevitable. All small- and medium-scale steelmakers and re-rollers have already shut operations in Dhaka and Chattogram. Both supply and demand remain weak. Shortage of domestic scrap amid a ban on ship breaking activities could keep demand for bulk vessels from Bangladesh even in the coming days.
• In the container market, offers for shredded increased to $260-265/mt cfr Chattogram, the Index settled at $255/mt cfr Chattogram on Thursday, up from $243/mt from the prior week. 

Pakistan

• Pakistan’s steel production came to a halt amid a national lockdown announced till April 14. With insufficient offers in the markets, importers were struggling to find suppliers. Domestic steel prices remained flat while scrap prices rose driven by supply crunch and global cues. The Pakistan government has released a PKR1 trillion stimulus package to the industry to deal with the fallout of the COVID-19 pandemic.
• The Pakistan International Container Terminal (PICT), container terminals at the ports of Qasim (Qasim international container terminal, QICT) and Karachi (Karachi international container terminal, KICT) have extended its demurrage-free period from the existing five days to 10 days, to support trade amid the lockdown due to the COVID-19 pandemic.
• The demurrage-free period is extended on import containers of vessels that arrived between March 20, 2020 and April 5, 2020. During the national lockdown many importers were unable to lift cargoes amid logistic disruptions and issues related to infrastructure. With possibility of more congestion at ports, the current container backlog is estimated to be at three weeks. As of now, scrap suppliers have not yet received waivers or extensions from shipping lines for detention fees, the daily charges for using a container.
• Trades of containerised shredded were at $255-265/mt cfr Qasim rising from $235-240/mt cfr Qasim a week ago. 
• Pakistan’s domestic steel market remained at a standstill. With almost all major steelmakers in Karachi and Punjab having shut operations, there was no movement of billet and rebar in the country.

($1= JPY108.86; TWD30.03; CNY7.05; THB32.74; MYR4.34; VND23,632.5; KRW1,210.5)

From all of us at Davis Index, have a great week.