Ferrous Market Update 03/12/2021
- Davis Index’s monthly UK 1&2, 3B, and OA ferrous scrap consumer indices jumped by £45-50/mt ($62-69/mt) delivered mill, respectively, following the conclusion of mill-yard negotiations in March.
- British monthly ferrous scrap settlements reversed February’s declines in March, with mill purchase prices climbing at a faster pace than those seen in the UK dockside market over the past month.
- UK ferrous scrap dockside purchase prices have only climbed £25-30/mt, as British mills have had to pay a premium to secure sufficient volumes from heading to bulk exporters.
- Merchant UK ferrous scrap suppliers have demanded a troubled large UK smelter pay cash prior to delivery, and in some cases a premium, for material, given that it has experienced challenges securing sufficient tonnages.
- Davis Index’s monthly UK 4A/4C, 8A/8B, and 12A/C ferrous scrap consumer indices increased by £45/mt delivered mill, respectively, over the same period. (£1 = $1.38)
- Ferrous scrap trading finalized in several markets before the weekend while others extended into this week with some lingering activity concluding on Tuesday.
- The $50-70/gt price increase was widely accepted with certain higher-demand regions paying various premiums to that base level.
- The Chicago and Philadelphia markets were described as less bullish than Indianapolis and some Southern markets as these regions completed business early and quickly.
- The Davis Index moved up by $73/gt for #1 busheling delivered Chicago consumer. #1 HMS rose by $52/gt, while machine shop turnings increased by $46/gt delivered. P&S 5ft and shredded rose by $51/gt delivered, respectively, in March.
- A consumer that experienced weather-related difficulty during February ended with lowered retail item volumes, within the Indianapolis-Cincinnati to Detroit area. This led to a shortage of internally available material forcing the mill to pay above market to draw in rail tons from outside regions.
- The Davis Index increased by $76/gt for #1 busheling delivered Cincinnati/Indianapolis consumer with the prime grades’ full transactions ranging from $$515-550/gt. The monthly index for #1 HMS rose by $55/gt with some numbers as high as $445/gt. P&S 5ft moved up by $52/gt with some premium, remote material approaching $475/gt.
- In Cleveland, the monthly Davis Index for #1 busheling increased by $68/gt delivered, while #1 HMS rose by $50/gt. Machine shop turnings moved up by $47/gt and shredded increased by $51/gt delivered Cleveland/Youngstown consumer.
- Pittsburgh and Quad Cities completed trading on Mar 8. Buffalo dealer prices were in tandem with surrounding market jumps at up $70/gt for #1 busheling fob dealer, while #1 HMS rose by $47/gt fob Buffalo dealer. P&S 5ft increased by $50/gt.
- The trend of $50-70/gt continued in the Southeast. Birmingham area encountered an increase of $71/gt on #1 busheling, and a rise of $48/gt on #1 HMS as P&S 5ft increased by $51/gt and shredded rose by $50/gt delivered.
- The Texas market did not follow the national trend with deals finalizing on Mar 9 at only an increase of $10-20/gt against February settled prices. Some mills with sufficient inventories offered buying prices at sideways with most sellers denying volumes.
- Larger dealers reported being shocked at the sideways offers that later ended in deals at up $10-20/gt compared to the previous month. Texas was affected by winter storms that impacted the state’s electrical grid and caused 1–2-week downtimes in production at mills and scrap yards.
- Market sentiment for April is pointing to another strong market as participants see the price momentum continuing into next month. Early projections place April scrap prices at strong sideways with potential upsides.
- Demand is projected to remain healthy with strong exports, full order books, low mill inventories, and record high hot-rolled coil (HRC) prices that have led to the vast spread between HRC and #1 busheling. However, scrap flows are muted, especially for prime grades amid the continued microchip shortage.
- The fall in iron ore spot and futures prices on Mar 9 has added another dimension. The overseas market seems to be softening or hesitating on news of declining prices in China due to a first-level red emissions alert in Tangshan. Steel prices in the country have also softened. The longer-term effect is unknown as production restrictions were also issued in the region which may balance supply and demand.
- Some market participants anticipate more production suspensions in Tangshan and potentially in other Chinese regions, which may further affect iron ore prices. On the US West Coast, the drop in iron ore prices has caused buying mills to hold back on deals pending further information. If the situation persists, export scrap prices from the US may begin to soften.
- Any changes in export volume demand may weaken the expectations in the US April trading period. Overall, scrap demand and prices are expected to remain strong through H1 2021.