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

December’s ferrous scrap trading in the US commenced around midday on Wednesday after a few mills in the Detroit region announced price increases of $70/gt across all grades, against November settled prices.


Detroit was deemed among the weakest markets with mostly flat pricing during the November trade. Consequently, the region was slated to adjust and pay the highest increases in December. Surrounding markets like Chicago, experienced stronger demand for #1 busheling and P&S 5ft as both grades generally settled up $10-15/gt, but with higher premiums paid as well.


Industry participants believe these price increases could be slightly reduced in other regions but expect a minimum $50-60/gt upsurge in other Midwest regions, with typical, more expensive late-trade deals to follow. Based on recent price trends, #1 busheling is up at $355-365/gt in Detroit while shredded has moved up to around $345-350/gt.


In the South and Southeast, market participants are expecting gains of $50-60/gt in December against November settled prices, given the higher settlements compared to Detroit and Chicago. In Houston, for example, the market traded predominantly sideways in October and November after the hefty increase of $30-40/gt on deals in September. 


The initial price surge extends price tags beyond the earlier anticipated increases of $30-60/gt for December with a total price increase in the range of $100-110/gt expected between December and January trading, compared to November settled prices.


Initially, the industry expected an even split for the price gains in December and January based on financial planning pressures at the mills and year-end reporting. However, Detroit and Chicago mills seem to have defied these expectations and have raised prices to block scrap from flowing south.


Market participants still expect additional growth in January, save any issues that may arise within the industry due to a rise in COVID-19 infections. 


Scrap supply flows continue to be affected by the pandemic in December compounded by the winter season and a shorter processing month due to the holidays.


The elevated scrap prices are supported by the growing spread between scrap and finished steel pricing. Hot-rolled coil (HRC) demand has swelled in Q4 and spot prices have grown by about $125/nt ($137.79/mt) in November. 


Other factors include mill operating rates that are still near 71pc, strong export demand with scrap tags increasing almost $70/mt for HMS 1&2 (80:20) since the end of October, and approximately $70/mt of price growth in metallics imports in the last 30 days.

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