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

Scrap prices need to improve further to provide a foundation for higher finished steel prices, according to market participants in the finished steel business.


Scrap prices in the early August scrap trade week were stronger than initially expected but not enough to shift finished steel prices upwards. 


Domestic steel demand remains weak in both flat-rolled sheet and rebar given the low capacity utilization at mills. Some in rebar sales thought that prices had bottomed out two weeks ago, but smaller distributors could achieve prices on the lower end of the ranges in the week ended August 7. 


In fact, flat-rolled distributors could announce a second price increase sometime in August to improve deal prices, though they remain skeptical since it comes down to fundamentals of supply and demand and for now, buyers are uncertain of policies and economic dynamics in Q3 2020.


Flat-rolled sheet

On July 13, US hot-rolled coil (HRC) was reported at 22-24 ¢/lb ($485-529/mt), fob mill. US HRC continues at an average of 22-23¢/lb ($485-$507/mt), fob mill, down $22/mt from the top of the range but buyers did not increase their purchasing prices despite the official price increase announcement. Excess mill inventories and short lead times of 3-4 weeks compared to previous historical levels of 8-9 weeks is also making it a buyers’ market for HRC. 


US cold-rolled coil (CRC) was at 32-34 ¢/lb ($705-749/mt) on July 13 and has dropped to 30-32¢/lb ($661-$705/mt), ex-mill, down by $44/mt.



On July 13, rebar prices were at 29-31¢/lb delivered to various buyers, correlating with a 27-28¢/lb ($595-617/mt), fob mill level.


On August 10, rebar prices were heard at around the same levels of $27-28.5/lb ($595-628/mt). Sellers note that over the past two weeks, prices on some smaller deals slipped as mills sought to pick up orders. Only a few large distributors were heard purchasing at the higher end of the range early last week, which increased the top of the range by $11/mt. One fabricator noted a price offer of 29.5¢/lb ($650/mt) delivered to Baltimore on August 7.


Fabricators seeking small stock replenishments on Friday, August 7, were informed that not a lot of imported material was readily available but that some vessels are scheduled for the week ending August 14.


Weak US domestic demand for rebar may receive support in August as imports from such locations as Mexico and Turkey have become too expensive in comparison to domestic mills. 


Turkish rebar import prices were reported as untenable by a buyer who imports and purchases domestic supplies as the buying prices have increased from Turkey on higher input costs.  Given the higher import prices, the buyer is shifting purchases to domestic sources. 


In Mexico, mills are preferring to sell rebar domestically at higher prices that are being influenced by the loss of production at ArcelorMittal Lazaro Cardenas due to a government influenced shut down affecting rebar supplies. Moreover, Deacero, an active importer into the southern US region, is shifting volumes to domestic sales, which could benefit the steelmaker at a time when US domestic mills were asking the Commerce Department to further investigate AD/CVD of rebar from Mexican mills. 


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