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

Sentiments in the US ferrous markets began shifting down shortly after January trading settled, with early price forecasts for February pointing toward a sideways market at best, as overall supply and demand become more aligned. 


Industry participants seem to agree that the market has swung downwards. However, the prospects for February are wide, with speculations ranging from flat prices to decreases of $20-60/gt, based on the starting point from January settled contracts. Regional supply and demand trends are also likely to cause price variances.


Prime grades such as #1 busheling are projected to fare better as the material remains in short supply and could potentially post lower declines, compared to cut and shredded grades. Thus, prime grades may remain unchanged or possibly decline by $10-20/gt. 


Other factors contributing to prime grades’ strength include a semiconductor shortage that has impacted automakers by lowering production and further tightening the #1 busheling supply. Moreover, basic pig iron has been priced far above prime grades, close to $570/mt cfr Nola in late December through most of January. This may contribute to stronger #1 busheling demand as the prime grade ranged between $450-540/gt across the US in January.


Meanwhile, shredded material may face the steepest drops from the Midwest to the East Coast and Southeast, as it is priced too close to #1 busheling and overhung the January market as evidenced by its selling prices losing steam by mid-trade this month. 


Shredded priced at the high end of the range may decline by $60/gt while most shredded transactions are projected to fall by $30-50/gt. Shredders across the Midwest and South have reported oversupply with many lowering intake feed prices by at least $30/gt and up to $50/gt or more. 


Flows for other secondary grades such as #1 HMS and P&S 5ft have also improved and are poised for price declines, though they are unlikely to match drops conjectured for shredded. These grades are aiming to fall by $20-40/gt. Although several areas continue to report some shortage of generation and flow for secondary scrap grades.


Several other market indicators such as exports, transportation issues, and high hot-rolled coil (HRC) prices are some of the other factors to affect prices next month. HRC is currently priced at $1,124-$1,168/mt ($1,020-$1,060/nt), fob mill, up about $660/mt from Aug 2020, but below the $1,200/mt levels heard in early January. Rebar transactions are trending at $815-838/mt (740-760/nt) fob mill, which is below the active asking list prices as buyers are negotiating on expectations of softer input prices. 


Steel supply remains tight, which supports price strength in the near term. However, the further upward potential is unclear considering growing sheet capacity in the US and the letup of steel prices in China.


Mill order books remain strong and expected February buying programs are anticipated to be like January’s, however some locations’ orders may reduce slightly following hefty January buys. Mills are also at risk of coming up short on scrap needs as sellers have suggested that many “paper” tons were sold in January, which can mean untimely order completion in some cases. 


Export activity has decelerated in January as US-origin HMS 1&2 (80:20) dropped by $42.50/mt to $440/mt cfr on Jan 25 from $482.50/mt cfr on Jan 12. Regional trading closest to the East Coast, affected by exports such as Philadelphia, anticipate $50/gt declines.

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