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

The ferrous scrap trade for October wrapped up by Friday, posting largely unchanged prices for most grades in certain areas and slightly downward or upward movements, for several categories in other regions, against finished September rates. Initial predictions were steering toward an upward market trajectory that faded by mid-September.


The markets largely reinstated unchanged prices in regions like Detroit, though slackened export demand brought softened prices along the East Coast down to the Southeast. Despite the soft trends in some deals, mills did not cancel higher-priced September orders in any region and are allowing scrap yards to ship those orders prior to shipping on the new contracts.


Certain Midwest areas gained some degree of upward prices for cut grades such as P&S 5ft, where demand was stronger. Premiums paid in September in some Midwest pockets also carried over a bullish tone.


In Philadelphia, the Davis Index for #1 busheling and other prime materials was flat at $280/gt delivered while HMS 1&2 (80:20), P&S 5ft, shredded, and other cut grades ticked down by $4-7/gt. HMS 1&2 (80:20) settled at $245/gt delivered mill, P&S 5ft at $255/gt delivered, and shredded at $284/gt delivered. Local business in the region was limited.


The Chicago market paid $289/gt delivered for #1 busheling representing a $6/gt increase from September. Cut grades also produced some growth with the Davis Index for HMS 1&2 (80:20) rising by $11/gt to $249/gt delivered. P&S 5ft ticked up by $6/gt to $274/gt delivered and shredded rose by $7/gt to $283/gt, delivered mill.


The inclines in Chicago were due to improved demand for those grades, along with market corrections that follow higher starting points arising from several late-trade quiet deals in September. The base price of $270/gt delivered for P&S 5ft and $280/gt delivered for shredded covered a portion of tonnage needs, which were supplemented by an additional $10/gt or more by Thursday, to meet full mill requests.


In Carolina, the Davis Indexes mostly decreased with HMS 1&2 (80:20) slipping by $2/gt to $273/gt delivered and machine turnings declining by $5/gt to $200/gt delivered mill. P&S 5ft and shredded both decreased by $1/gt to $287/gt delivered and $291/gt delivered, respectively. The #1 busheling index increased by the same amount to $305/gt delivered. 


Within the region, deals that had achieved a premium, especially springboard, were reported with price declines of $5-10/gt on shredded scrap. The outliers though are adjusted via the indexing process and, therefore, result in limited index change in the October period. 


The scrap markets in Texas settled predominantly sideways as #1 busheling decreased by $2/gt to $320/gt delivered but HMS 1&2 (80:20), P&S 5ft, and shredded remained unchanged at $286/gt delivered mill, $305/gt delivered, and $307/gt delivered, respectively. The machine turnings index slipped by $1/gt to $234/gt delivered.


Looking towards November, shredded scrap inventories that were unable to be placed due to the initial expectation of higher-end pricing achieved in September, are pointing towards an overhang into November. By the time yards adjusted offers downwards in such cases, mills had met their buying quotas.


Scrap flows into yards are considered sufficient against lower mill demand levels compared to a year ago, but scrap sellers warn that given the restricted economic activity, flows are still limited. Given the risk of soft November pricing, many scrap yards sought to clear inventories and are not in a hurry to build back volumes in a downward market.


Given the hard-fought gains in finished steel prices by mills over the past one-and-a-half month, which has HRC up by about $200/mt against early August prices at $683-705/mt fob mill, several market participants expressed the possibility of sideways pricing into November and December if adequate export demand is maintained.

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