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

The rising price trajectory for ferrous scrap is expected to carry into the October trade week following a minimum of $20-40/gt gains made during September settlements. 


However, the extent of increases is not anticipated to match the prior month’s levels with early indications suggesting a rise of $10-20/gt in October over September settled prices with prime and shredded grades slated for the most growth.


Several sellers report that supply and material flow into yards remains tight, especially for shredder feed in some regions. A few yard owners have noticed an extensive lack of peddler traffic. However, many dealers are witnessing a pickup in scrap flows and, in some cases, outpacing transportation capabilities. 


Flows have noticeably escalated since mid-September, increasing by around 20pc for many yards compared to last month. Some yards surprisingly reported that inbound material movement has now returned to 100pc of typical, pre-COVID-19 volumes.


Various sellers convey they are still shipping August orders while also trying to fulfill September ones amid some grumbles about trucking issues. Several mills in the Midwest, that have ramped up at the slowest pace for the past 60 days, are informing of low inventories and are preparing to buy added tons in October. Consumers and traders are already, actively inquiring about securing TBD orders this week.


In the Chicago district, a few major mills purchased supplementary, spot material late in the September trade, at prices that were $15-25/gt above published numbers. These late deals may create a higher starting point for some base prices during negotiations for October tons.


Flat-rolled mills continue to steadily pick up the pace of steel production, while announcing measured price increases, also contributing to the gradual boost in scrap demand. The latest capacity utilization rate data stood at 65pc last week, while several market participants report mills are buying at about 80pc of typical levels. Mill order books are improving as aligned with revival in the automotive sector.


Exports have slowed a bit mid-month due to some downward pressure from Turkey. However Turkish mills are expected to resume buying shortly to fulfill needs for October and thereafter. Also, the East Coast, West Coast, and Houston docks have maintained strong activity during September. Domestic requirements in the US have been sufficient to maintain scrap demand, despite the pause in Asian trades.


Feasibly, scrap prices will not decrease during Q4 2020 as industry participants project prices will remain unchanged to slightly up for the rest of 2020. The upcoming Presidential election is creating some uncertainty with regards to its outcome and how the result will affect the stock market as well as the steel industry.


Further price improvements are expected heading into Q1 2021, in line with improving steel sales, demand resurgence and ongoing export activity, although some sellers believe the upcoming direction of exports is not entirely clear.

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