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

Market strength is expected to continue in the US ferrous scrap market next month with prices potentially rising across grades.


Ferrous scrap prices are noted to remain strong both in the domestic and export market. However, some concern remains on trade expectation should market corrections begin in late May or early June.


Turkish imported scrap deals moved the Davis Index for Turkish imports of US-origin HMS 1&2 (80:20) to $509.39/mt cfr on Wednesday, up by $60.99/mt from Apr 30 and by $27.18/mt against May 6. The buying influence from Turkish activity has fueled global scrap prices throughout the month. 


The pressure on bulk buys increased with tight global scrap inventories, limited availability of containers, higher freight, and increased demand from mills given the surge in economic activity in the domestic and export markets. US docks have increased scrap buying prices thereby competing with domestic mills for scrap inventories, especially, in coastal areas. 


US scrap demand, together with mill inventories, diverges in various regions as certain Midwestern areas have witnessed an overhang of secondary materials including #1 HMS, shredded, and P&S 5ft. This may be partially offset in Detroit during June trading as Gerdau Monroe will be looking for less material.


However, sources in nearby regions, such as just south of the Midwest, noted some large brokerage entities picked up any unsold tonnage from May, thus leaving secondary grades in limited supply throughout certain locations.


West of the Chicago region, SSAB is said to be short of scrap and is anticipated to have a larger buy program in June, This may provide a home for amply supplied secondary grades. Overall secondary material is expected to increase by $20-50/gt in June compared to May, with regional variance.


A few others see secondary grades rising more, regardless of supply, possibly up to $70/gt when accounting for finished steel prices, disparity in steel mills’ rising margins versus scrap price growth, export strength, and the recent pig iron import price surges.


For reference, the Davis Index for basic pig iron was $652/mt cfr New Orleans port on May 14, up $76/mt from $576/mt cfr Nola on Apr 16. Meanwhile, supply is tight and offer levels continue upwards, some as high as $720/mt cfr Nola. Next deals will offer more clarity, but prices are projected to remain strong.


Prime grades such as #1 busheling continue to be in tight supply amid the ongoing microchip shortage and are also slated for price increases although not as much in areas holding oversupplied secondaries. Prime grades are expected to rise by a minimum of $20-30/gt in June against May settled prices.


On the other hand, some market participants foresee strength in prime grades matching the strength in scrap alternatives such as pig iron. In that case, primes may be in place for much larger upward moves closer to $50/gt, especially if ensuing pig iron transactions take another large jump which sources are predicting.


The Southeast and Texas are forecasting strong increases on an export tug and continued strong finished steel prices. Additionally, given the substitution of shredded scrap due to limited prime grades, the demand is expected to support the price increase on the grade. Texas scrapyards are also expected to begin seeing scrap demand from the new flat-rolled SDI plant in Sinton near Corpus Christi. 


Hot rolled coil (HRC) spot prices continue trending up and are now at $1,675-1,708/mt ($1520-1,550/nt) from $1,542-1,609/mt ($1,400-1,460/nt) on May 3, up $133/mt from the bottom of the previous range and $99/mt from the top of the same range. 

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