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

Ferrous scrap trading for the November cycle is slated to begin by Tuesday or Wednesday with expectations of limited price movements compared to October.


The market gradually firmed up after October trading settled with many already lining up some early TBD orders for tonnage by Oct 12. Several market participants view the November market as sideways to strong-sideways, while some forecast stronger increases. Certain areas, including pockets in the Midwest, are seeing limited availability and healthy demand for specific scrap grades like P&S 5ft.


Steel mills have reported plans to purchase adequate amounts of material to fill November requirements, though market participants may not see any sweeping activity during the trade. Cut grades, that include Shredded and HMS 1&2 (80:20) will likely trade at unchanged or slightly increased prices, while prime grades like #1 Busheling and P&S 5ft have some upward potential.


Pig iron prices have also strengthened at a faster pace than prime grades. The current gap between the two is close to $90/gt. Pig iron import tags were at around $375/mt cfr New Orleans port on Oct 29 while #1 Busheling was $289/gt delivered Chicago mill. On June 4, imported pig iron was at $317/mt cfr Nola while #1 Busheling delivered Chicago was trading at a similar price.


Steel production rates and spot prices continue to increase, while scrap exports have been active. In Turkey, import prices for US-origin scrap regained strength to $295/mt cfr on HMS 1&2 (80:20) as Asian countries increased scrap buys in both bulk and containers on domestic recovery efforts and improved Chinese sentiment. Stronger Chinese demand and pricing is also supporting regional trade flows, limiting dumping prices. 


Hot-rolled coil (HRC) prices are close to $680/nt ($750/mt) fob US mill, increasing by about $10/nt compared to mid-October levels and up over $200/nt compared to mid-August lows of near $440/nt fob US mill. Despite the higher prices, HRC is heard in the market at $620-680/nt ($683-750/mt) fob mill as some buyers are negotiating deals. Cold-rolled coil (CRC) is trending at $820-880/nt ($904-970/mt) fob mill also depending on volumes purchased.


Rebar buyers who source from domestic mills and import side are reporting a slight decrease in prices on deals this week, although offers are trending strong. Fabricators are experiencing a shorter backlog of jobs to shipments pointing towards lower order book activity into the future. That has been influenced by either canceled, delayed, or unavailable sales prospects, as well as the expectation of softening prices. US rebar prices are listed at $600-610/nt ($661-672/mt) fob mill at present, but several market participants noted most deals at $590/nt ($650/mt) fob mill.


The Associated General Contractors of America (AGC) reported last week that construction firms are being affected by project deferrals and cancellations. Around 75pc of their survey responders noted scheduled projects postponed or canceled in September compared to about 60pc in August. Moreover, 34pc of respondents said they expected pre-pandemic levels only by late 2021. Seventy-eight percent of surveyed firms cited a preference for new federal relief measures to assist against the impacts of the pandemic. Dynamics in flat production will have more influence than construction activity on scrap pricing over the next few months. 


Electric arc furnace (EAF) mills that purchase many prime tons are adding capacity over the next several months. This includes a twofold increase in capacity at Big River, Steel Dynamics’ new Texas mill, JSW’s EAF restart in Q1, Nucor’s new plate mill and Kentucky expansion, and ArcelorMittal’s new Alabama EAF. Together, these new capacities will add approximately 10mn nt to US steel production, which is projected to impact steel prices in 2021 as increased supply is added to the market, possibly beyond demand until markets fully balance.


The December scrap market has opinions ranging from strong-sideways to bullish with increases up to $20-30/gt against November settled prices.

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