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

December price increases for ferrous scrap far surpassed earlier expectations on tight supply and strong mill programs that need ample tonnage to fulfill requirements amid rising steel demand.


Increases of $70/gt against November settled prices moved a portion of material last week. However, numbers continued to rise, as high as $100/gt, through this week. Several quiet deals adding high premiums, tacked on a further $20-35/gt to the high end of the range especially for prime grades, throughout the Midwest. 


In Philadelphia, prices rose by $50-85/gt with the prime grades like #1 busheling settling at $330/gt delivered and cut grades like P&S 5ft at $313/gt delivered. Shredded settled at $351/gt delivered. Scrap prices in Pittsburgh increased by $70-90/gt with the Davis Index for #1 HMS settling at $320/gt delivered and P&S 5ft at $352/gt delivered.


Regarding the lower range of price increases, many truck shippers were more apt to be up $50/gt, especially in the Philadelphia region, due to regional or freight savings. Rail shipments reeled in the higher values, especially in Detroit and Chicago. In the former, the Davis Index for P&S 5ft increased $89/gt to $345/gt delivered.


P&S 5ft in the Chicago area ranged from $360-380/gt with outliers as low as $345/gt and as high as $405/gt delivered Chicago mill. The grade was limited but in high demand in the region like November, with last month’s base price for the grade ranging from $270/gt to $305/gt plus delivered.


In the Southeast, the purchases by Big River Steel led to the high pricing early on. The Davis Indexes increased by $94/gt to $417/gt delivered on #1 busheling and by $88/gt to $400/gt delivered on shredded. The index for #1 HMS increased by $83/gt to $372/gt delivered. 


Like the Midwest, scrap prices in the southeastern US also traded up $70/gt early in the trading week last week but climbed to $80/gt and more amid premium on deals this week. Mills in Texas are seeking shredded at $400/gt plus and #1busheling at $420/gt plus, up $90-105/gt compared to deals in November. 


In Houston, the Davis Indexes increased by $81/gt for #1 busheling and #1 HMS to $399/gt delivered and $368/gt delivered, respectively. The index climbed by $76/gt to $380/gt delivered for P&S 5ft, and by $79/gt to $390/gt delivered for shredded. Deals for shredded and #1 busheling were higher as mills eagerly sought those grades for their inventories. Some scrap yards sold early and were out of available inventories while others noted they would be holding on to the limited stock until January trading given the expectation of a further price increase at that time. 


The Davis Indexes in Birmingham increased by $81/gt to $393/gt for #1 busheling while #1 HMS encountered an index increase of $77/gt to $353/gt delivered. The indexes in the Carolinas market for #1 busheling increased by $66/gt to $373/gt delivered and by $60/gt to $333/gt delivered for #1 HMS. 


Metallics imports such as pig iron are currently transacting at $470-480/mt cfr New Orleans indicating an increase of about $100/mt in the material since transaction levels at the beginning of November.


Looking ahead

Market sentiment for January places scrap tags with an additional $20-30/gt above December transactions after a long-running market suppression was followed by surging prices in HRC, exports, and metallic imports amid limited supply. 


Some dealers noted that scrap prices are reaching “inflationary pricing” with mills pushing what was expected to be January pricing in December deals. Scrap prices were expected to increase by $100-110/gt in aggregate for the two months. Flow and demand continue out of balance as exports firmed up and domestic intake is reported by some at 20-30pc lower than the same prior-year period. Most mills did not buy all the tons sought even at the elevated prices, which caused what some market participants dubbed the “frenzy and hysteria in December trading.” 


Several dealers noted that flows are increasing dramatically. The bottlenecks expected in January and February could ease after the recent December rises that resulted in increased scale prices at yards. Flows are expected to improve by spring, though market participants all noted the uncertainty of COVID-19 on their business. One participant noted that some yards may be one COVID-19 case away from shutting down for two weeks or even longer, which would affect total production hours for the month. Additionally, temporary lockdowns in various states may have an influence on January and February scrap feedstock flows. 


Overall positive market sentiment is forecast for Q1 2021 as domestic mills have full order books and will continue strong production. The higher prices on finished steel may influence imported steel decisions in Q2 2021, which could dampen prices. Although, additional capacity coming online is expected to keep scrap in strong demand.

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