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

The domestic ferrous scrap trade for November formally commenced on Thursday after Detroit area mills announced no change from October’s settled prices for all grades.


The surrounding Midwest markets have been transacting since the beginning of this week at flat pricing on secondary grades with some transactions for prime grades such as #1 busheling at prices up $10-25/gt in the Southeast region. The South is expected to trade Thursday and Friday with sideways movements across all grades.


Some sellers believe that limited tons of material will move at October level pricing. Several mills are still experiencing delays in their October scrap orders. Large orders were taken in some regions last month that extends past available tonnage, according to some sellers but others experienced an overhang of scrap following the October trade, especially, for shredded scrap.


The metallic import market is quiet with pricing trending flat in the US on Thursday as several deals concluded in late October.


Transportation issues persist for some scrap yards regarding truck or rail, though barge transportation in the Midwest has resumed now. The Illinois River has been closed for major overhauls since July, affecting companies in or near Chicago, a manufacturing hub dependent on barge transports. The waterway was expected to reopen near the end of October and repairs are reportedly almost complete.


Barge scrap providers, forced to redirect transport of supplies, coped with added costs and additional freight by switching to railcar or truck hauling. Normal business on the river will restart in November easing some burdens recyclers have faced due to market demand and the effects of the COVID-19 pandemic.


Movements originating at the New Orleans, Louisiana (NOLA) port heading north to the Chicago area resumed barge business in October, while southbound hauls from the city are projected to continue by early November. Shipments via barge may reach destinations by the end of November.


Exports and East Coast dock prices remained sideways with small upward moves and short bursts of activity over the past month but have increased in the past two weeks. US-origin scrap deals for shredded were reported at $300/mt cfr Turkey on Oct 26, for HMS 1&2 (80:20) at $296.50/mt cfr on Nov 3, and for HMS 1&2 (80:20), shredded, and bonus material at $310/mt cfr average price on Nov 5. These increases are supporting positive export sentiment on the East Coast.


The containers market is also experiencing price boosts on demand from India, Pakistan, and Bangladesh. Export demand is also active on the West Coast with regional Pacific Northwest mills following the sideways price trend established in the Midwest. Some mills are seeking average tonnage while others are proceeding with small buys. 


The recovery activity and increased offer prices on hot-rolled coil (HRC), cold-rolled coil (CRC), and rebar in the US, Turkey, Taiwan, South Korea, and other Asian markets, is expected to buoy global scrap prices and ongoing demand. Mexican flat steel prices have also continued rising on higher offers. Mexican buyers were actively sourcing scrap from Texas, Southwest, and the West Coast. 


Given the predominant flat status in November, market participants are beginning to forecast a strong sideways to upwards price movement in early December. If the rise in scrap prices does not fully materialize in December due to end-of-year accounting and inventory management concerns by mills, the remaining effect is expected to be reflected in January trading. 


Mills will continue fulfilling orders on the strong recovery and capacity utilization in December while the winter season and holidays are expected to limit feedstock and available processed scrap. Moreover, the scrap market could be supported by strong demand via bulk and containers in the export market. 


The tepid energy pipe market is also noting a resurgence with rig counts starting to increase over the past two months. According to Baker Hughes data, rotary rigs increased week-on-week by 3-86 units in Canada and 9-296 in the US. While this is still well below the 822 rigs in the US and 142 in Canada a year ago, momentum is building after the crash in the oil industry in H1 2020 due to the pandemic.


A stimulus package announcement on infrastructure investment, extended unemployment benefits, and other government assistance programs is expected in Q1 2021.

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