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

Domestic ferrous scrap prices will potentially soften, mainly for secondary grades, during April trading based on current market indications and widespread sentiment among sources polled.


It is still considered early in the trade cycle, but sources feel the ferrous scrap market may have reached a peak as global activity and US exports have fallen considerably with bulk markets slated for additional correction along with higher scrap flows in spring.


Still, some market participants pointed out that several February scrap orders have recently completed due to weather or logistics and believe this will somewhat limit the extent of the downside.


Prime grades

The supply of prime grades including #1 busheling remains strained and the trend does not seem to have a near-term resolution in sight. The global semiconductor shortage has led to continuing auto plant shutdowns along with a resulting loss in the generation of this prime material. Prime generation is further dampened with the additional plant suspensions announced in the US and Canada on the vital chip supply concerns. The grade is estimated to remain mostly flat in April, against March settled prices, with some upward capacity of $10-20/gt depending on mill and region. The potential increase is also based on the sustained upward activity for flat-rolled producers as they consume heavy volumes of prime scrap.


Secondary grades

Secondary grades have a higher probability of price declines in April as seasonal flows have picked up. Obsolete material such as #1 HMS, shredded, and P&S 5ft are slated to drop, by $10-30/gt although some market participants believe the declines may be more substantial in some pockets such as the Midwest where these grades are well-supplied. 


In the Southeast, market participants expect secondary grades to trend down $20-40/gt compared to March settled prices due to increased inventories. Some shredders have started adjusting feedstock buying prices down. Texas encountered an unusual flat to limited gains of $20/gt trend on secondary in March due to power outages in winter storms. In April, Texas is expected to balance the net between the remaining $30-50/gt unrealized gains and any losses encountered by the commodity in April with some sellers slated to trade sideways while others may capture some remaining balance. 


Export activity

The latest daily Davis Index for Turkish imports for HMS 1&2 (80:20) stands at $419.17/mt, down $25.63/mt compared to $444.80/mt on Feb 23 and down $13.08/mt in one week from $432.25/mt on Mar 15. Increasing export freight rates are pulling secondary grades down as well.


East Coast dockside collections have declined by $10-20/gt in the past week with further drops conceivably on the way. On the West Coast dockside prices are also being heard adjusted down. Container prices on both coasts have dropped by $30-40/mt in fas terms on HMS 1&2 (80:20) against early March. 


The export market may be nearing a bottom though, as demand in Latin America may counter US exports to Turkey at waning prices. Asian buyers may continue purchasing scrap at strong prices despite some softening on lower iron ore prices in India and import prices into China in the past few weeks. 


Import activity

Pig iron import prices have remained firm this month at around $570/mt cfr Nola, even though import activity has slowed down. The grade is in high demand, transacting domestically each week and in many cases, acting as a substitute for prime grades that have faced tight availability. 


Finished steel

Finished steel prices continue to bring strong margins as reported by mills’ recent earnings releases. US domestic hot-rolled coil (HRC), currently spot priced at $1,389-1,410/mt fob mill ($1,260-1,285/nt fob mill), maintains a record high spread compared to #1 busheling. HRC prices increased by $242-265/mt since Jan 25. Cold-rolled coil (CRC) is trending at about $220/mt higher than HRC prices. In the past week, lower-priced deals disappeared but the top range remains unchanged. 


The pricing gap between shredded and #1 busheling continues to widen as well and may lead mill optimizer scrap purchase systems to select more volume of shredded or other secondary grades in its mix. 


However, some sources believe the spread between prime and secondary is not sustainable and should not grow any further. Prime price strength may sustain secondary grades to some extent. Also, some sellers have noted that shredder feed is not amply flowing at the scales despite a current strong pricing environment.


Prices for US rebar are at $871-937/mt fob mill ($790-850/nt fob mill), with larger volumes achieving the larger discounts. Compared to Jan 25 prices, rebar prices rose by $56-99/mt.

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