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

Frequent unexpected changes in supply and demand have left US domestic ferrous scrap market participants with conflicting views about prices during the April trading week.


A significant decrease in prices is expected even though the range of decline remains wide. Most market participants expect drops in the range of $40-80/gt, while some project a fall of as much as $100/gt for obsolete grades. Prime grades could decline to a lesser extent, with forecasts at down $30-50/gt compared to March settlements.


These price forecasts are generally based on amount of industrial activity that persists in certain pockets.  Market participants are unsure of the trade onset with some suggesting next week. Few are in any rush as flows and overall industry activity has substantially decreased and many scrap yards have significantly reduced scrap yard inventories to mitigate risks over the next several months.


Some sellers continue to receive scrap on a large, industrial scale with a few of them completing remaining March scrap orders that were not cancelled, this week. Yards have also lowered the intake feed prices by about $60-70/gt in anticipation of April price decreases.


Several scrap dealers report implementing further COVID-19 safety precautions at yards through the weekend and small retail operations have been temporarily closed due to peddler traffic concerns relating to safety cautions for the general public.


Gerdau in Ft. Smith, Arkansas has informed suppliers they will resume the receipt of scrap later this week, if possible, with plans to restart operations on a limited basis to fill existing orders. The company suspended scrap receipts on March 20 citing auto shutdown concerns.


Market participants in the south and southeastern US told Davis Index that industrial production and demolition activity has decreased by at least 50pc and in some cases, demo work and construction have almost stopped. The few projects still operating are among those included in an essential capacity.


Most stamping plants that support automaking, have shut down in tandem with the automotive industry, heavily impacting industrial accounts with integrated steel mills. Market participants in the Midwest estimate industrial flows to have declined by about 50-75pc as local steel mills have curtailed operations the most.


A few smaller steel mills have indicated some improvements in orders as they pick up prospects from gaps left by larger integrated mills that were forced to reduce their operations.


Some companies unrelated to the auto industry have continued running, though EAF’s have also reported large reductions in April buying programs. Mini mills that supply to foundries will also reduce production in response to stoppages announced by foundry consumers.


Gerdau in Cartersville, Georgia has told suppliers it will idle until mid-April mostly due to the slowdown in foundry customers. 


Rebar mills have reported typical volume buying programs for April, so far, based on scrap availability.


Inbound scrap flows have been largely reduced and will continue being affected over the next several months. Market participants have hazy expectations due to several key factors including, local social distancing orders, anticipated scrap price declines, finished steel prices, demand trends, outages and restarts, export activity, container availability, auto industry recovery, industry layoffs, recession level, and market participant disposition or ability to continue business amid scrap price liquidity.

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