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

Ferrous scrap trading commenced for the August cycle on Tuesday after a few Detroit area mills came out to bid unchanged price levels for #1 busheling and other prime grades.


Consumers also announced bids for secondary materials including #1 HMS, P&S 5ft, and shredded at down $20/gt against July settled prices. This pricing trend further widens the unprecedented gap between #1 busheling and shredded to approximately $150-165/gt based on region, compared to historical spreads that were closer to $30-40/gt.


The levels established today are consistent with the outlook anticipating a $20/gt or more drop in secondary grades on ample scrap supply, falling exports, and declining scale prices. Market participants anticipate a smooth trading week since bid levels are on the shallower end as some feared a price erosion of $30-40/gt. 


However, transportation issues abound as some sellers report that manpower and logistics issues have led to July scrap orders scarcely being fulfilled so far. Still, market participants have not informed Davis Index of mass mill cancellations on higher-priced, prior orders yet. Since mid-month, scrap dealers noted the possibility of 50-60pc deliveries on July commitments with substantial volume balances owed into August. Several noted the risk of losing priority on deliveries to mills canceling orders given the backlog created by logistics constraints in truck and rail deliveries. 


Ferrous export values continue to trend down on weakening demand and ample supply with the Davis Index for US HMS 1&2 (80:20) exports at $463.60/mt cfr on Tuesday. This indicates a downward movement of $37.22/mt for the grade compared to $500.82/mt cfr on Jul 6. 


Price trends set in Detroit, if accepted and extended into surrounding markets would place shredded at $480/gt delivered Chicago and $480-490/gt delivered to Detroit consumers. P&S 5ft would fall to $490-495/gt delivered Chicago mill with the grade at $470-475/gt delivered Detroit.


Dealers note that mills are calling with regularity for shredded shipments, which are difficult to fulfill due to transportation challenges into and out of the yards as well as limited feedstock in some regional shredders. 


There seems to be more abundance of heavy melt such as #1 HMS because of which, the grade could decline by $30/gt in areas influenced by the drop in export volumes and prices. Mills are using shredded for faster production in new chemical compositions given the higher-priced prime grades and pig iron. Therefore, some dealers hope for possibly better trade prices on shredded. 


HRC consumers continue noting strong finished steel demand at higher prices of $2,006-$2,072/mt ($1,820-1,880/nt) with long lead times that will likely support the elevated market prices into Q4 2021. Rebar, plate, and other steel products are also trending at historical highs due to limited supplies and demand by end consumers as well as restocking at metal centers. 


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