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

Ferrous scrap prices are anticipated to rise in July trading as several US markets remain strong on tight supply and healthy mill demand.


Early projections view prices ranging from flat to up $20-30/gt across all grades, over June settled levels though some forecast the July market possibly rising by $50/gt or more, analogous to last month, on numerous factors driving the upward market strength. Still, the predominant view is a gain of $30/gt on domestic mill needs, high finished steel prices, tight scrap and finished steel inventories, and continued scrap export demand. 


Mills and scrap dealers are reportedly holding low inventories on the ground amid persisting logistics issues. Scrap yards throughout the US are struggling to get sufficient trucks and rail cars to ship material on prior orders, further impacting sentiment.


The market has been fueled by export activity lately, despite the recent, intermittent pauses. US-origin HMS 1&2 (80:20) exports to Turkey continue pushing along without much downward pressure, though also without noteworthy upside.


Prices for US-origin HMS 1&2 (80:20) have been rangebound hovering near $500/mt cfr since first reaching that level in early to mid-May. The Davis Index for US HMS 1&2 (80:20) stood at $498.75/mt cfr on Monday, down by $14.44/mt from $513.19/mt cfr exactly a month ago and down $1.25/mt from $500/mt cfr on Jun 7. 


Some sellers that provide to bulk exporters off the East Coast are awaiting possible dockside price decay by next week, though most bulk and containers exporters anticipate continued demand from emerging markets and some moves to electric arc furnaces in Asia that will place pressure on scrap supplies.


Mills in the vicinity of the East Coast such as the Philadelphia market, continue with minimal scrap buying programs. Some sellers in this region would not be surprised to see July domestic price efforts by mills remain unchanged or drop slightly, but the latter is unlikely given the overall national trend and opportunity to move scrap to higher demand regions.


Meanwhile, in the Midwest and Ohio valley, demand is expected to be strong in July on restricted supply, barring shredded and shredder feed in Chicago. This material has been accruing in the market and left without a home as Southside Recycling’s shredded facility still waits for final permitting. The loss of this major facility operating in the area has caused local shredders in Chicago to be able to continue paying under market for intake feed, estimated at about $20-30/gt lower than standard.


Ferrous increases in summer are contrary to historical scrap price movements that are typically influenced by mill maintenance slowdowns and increased demolition work. The industry does not foresee this traditional downside occurring in the near term and maybe throughout the year due to the supply and demand changes influenced by COVID-19 and the ongoing recovery.


Pig Iron

Prime grades including pig iron, and secondary grade, P&S 5ft have been in very limited supply boosting demand for scrap substitutes such as blast furnace iron or other similar material. Basic pig iron is currently at $672/mt cfr New Orleans and has maintained a gradual price growth since late 2020 when it first exceeded $500/mt cfr Nola, then surpassed $600/mt cfr Nola in May.


Finished Steel

A large disparity remains between finished steel and #1 busheling prices, which is maintaining bullishness on the scrap supply side. US hot-rolled coil (HRC) prices have been climbing dramatically since the end of 2020. HRC is now priced at $1,829-1,873/mt ($1,660-1,700/nt) fob US mill in the spot market and seems to be heading higher. Prices for HRC have risen by $66-110/mt compared to Jun 4 and $440-463/mt against Mar 22. 


Cold-rolled coil prices continued trending about $200-210/mt higher than HRC prices and galvanized coil about $300-310/mt over HRC in the spot market. 


US rebar pricing is at about $1,036/mt ($940/nt) fob US mill at present with bookings available for late August to early September or about 10-12 weeks lead times. Immediate availability from mills is difficult according to market participants but distributors have been restocking so balancing that steel availability at higher prices. Prices have risen by $99-165/mt against rebar prices in mid-March. 


In Chicago, #1 busheling changed hands at $610/gt delivered mill during June trading. For comparison, the spread between HRC and #1 busheling has averaged between $250-300/gt over the past 10 years.


Market participants note that trucking and rail logistics are playing a role in supporting finished steel prices. Moreover, while demand is strong many of the mill sales are for restocking, adding to their hopes or expectations that prices will temper in Q4 2021 despite many steel analyst groups reporting their expectations of prices continuing their current trajectory until early 2022.


Rebar distributors are managing inventories from mill floors adding to the potential of a deeper price drop should prices dampen according to several rebar fabricators. The middle buying opportunity is contributing to inflationary prices.

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