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

US containerized scrap prices trended up for the 12th consecutive week on the West Coast and regained traction on the East Coast on Thursday. 

 

The news that China will allow ferrous scrap imports beginning January 1, 2021 along with active inquiries from Chinese mills has bolstered the market, despite a slowdown in the Turkish imported scrap market, which saw the daily Davis Index for US-origin HMS 1&2 (80:20) trending flat this week.

 

Last week, some sellers in the New York market reported deals at higher prices compared to two weeks ago, while buyers reported container buys at lower prices displaying mixed movements. Resistance from buyers pushed prices down towards the year-end as some sellers sought to capture the financial gain prior to the year-end financial closings.

 

This week, however, most scrap buyers remained on the sidelines due to the holidays but some accepted higher prices. Buyers have argued that finished steel consumers are unwilling to accept the continuous upcharge based on higher input prices and softening iron ore prices, but sellers point to limited supplies in a high demand period along with fluctuating but strong prices in iron ore as well as high pig iron prices for the increases. The uncertainty of rising COVID-19 cases, mutant strains, and effectiveness and adoption of the vaccines are also adding to the market uncertainty. 

 

However, offers for containerized scrap have remained firm in the US as the year ends, despite buyer resistance or silence. The same trend was evident in the UAE, Central America, Australia, Russia, and the EU. 

 

Pakistan’s ability to maintain production levels could be hampered by slow construction activity and cash flow issues in large infrastructure projects. In India, shipbreaking scrap prices fell on low demand while billet prices dropped on limited trades. Bangladeshi buyers are showing resistance to higher rebar prices. South Korea and Taiwan have countered higher offers with lower bids or remained out of the market on uncertainty.

 

The weekly Davis Indexes in New York increased by $23/mt to $444/mt fas for #1 busheling and rose by $25/mt to $412/mt fas for HMS 1&2 (80:20). The index for P&S 5ft and shredded climbed by $24/mt to $442/mt fas and $439/mt fas, respectively. Machine shop turnings slipped last week but gained $11/mt to $340/mt fas this week. 

 

The Davis Indexes in Los Angeles climbed by $24/mt for #1 busheling to $450/mt fas. The HMS 1&2 (80:20) index rose by $16/mt to $417/mt fas as both P&S 5ft and shredded increased by $14/mt and $13/mt, respectively, to $437/mt fas. Compared to Dec 3, the HMS 1&2 (80:20) index has climbed by $118/mt.

 

Container availability and higher freight charges remain a concern for buyers and sellers on the West Coast.  Tight scrap supplies and feedstock despite higher scale prices continue, also some market participants withdrew from the market until early January anticipating higher prices. 

 

In San Francisco, the index for #1busheling climbed by $27/mt to $445/mt fas and HMS 1&2 (80:20) rose by $15/mt to $413/mt fas. The indexes for P&S 5ft increased by $19/mt to $434/mt fas and shredded rose by $22/mt to $437/mt fas. 

 

The Davis Indexes in Seattle for #1 busheling and HMS 1&2 (80:20) increased by $12/mt to $448/mt fas and $422/mt fas, respectively. The index for both P&S 5ft and shredded rose by $11/mt and $10/mt to $440/mt fas, respectively, as buyers purchased better grades at almost the same price and demand level.

 

Mixed signals for Q1 2021

Market participants expect steel and scrap to continue strong through Q1 2021 on robust demand for finished steel and long lead times in the US and EU domestic markets. Additionally, US rebar prices and US hot-rolled coil (HRC) prices continue firming up in defiance of previous expectations to flatten. US domestic scrap is also expected to trade $60-100/gt higher in the January trading period against December settled prices. 

 

Prices of finished steel have also climbed throughout Asia and in Brazil. Turkey mill’s scrap imports in the first 11 months in 2020 exceeded January-November 2019 volumes. Turkish finished steel prices remain stable after recent hikes reflecting higher raw material prices. Turkish mills are reporting strong order books though some discounts are beginning to be heard. Buyers, however, have withdrawn as offers rose in addition to the end of year holidays.

 

Markets in Asia for HRC are flat as they wait for cues once business resumes after the holidays. In some Asian markets, HRC and other finished steel goods prices are beginning to flatten or soften. Some question whether China has a growing inventory issue that may weigh down prices in its domestic market and its export destinations later in Q1 2020. A weaker Chinese market could also weigh on the Turkish rebar export outlook. In the US, the rig count has trickled upward with the number of rigs climbing by three to 351 though Canada’s week-on-week rig count declined by 23 to 59 as the year comes to an end. 

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