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

Sentiment for US August ferrous scrap trading is mostly veering towards a likely price decay when transactions begin next week. This possibility was initially anticipated after ferrous trading in July settled on sufficient inventories per seasonality. However, a weakness in exports may ensure a downward trend.


Secondary grades such as P&S 5ft and #1 HMS along with shredded are projected to decline by $20-30/gt while prime grades that include #1 busheling, may remain unchanged or fall by $10/gt versus July settlements.


Scrap flows have been healthy and outpacing outbound scrap sales, which led many scrap dealers to lower scale prices by mid-month. The overhang in material emerged more noticeably during July trading although, not all sellers see this as an indication of falling prices when considering all factors. Heavy melt grades such as #1HMS are considered as receiving higher yard flows compared to P&S 5ft. 


Industry participants note that mill demand remains high while transportation issues continue to impede deliveries, which should uphold some price strength in scrap as prior orders remain unfulfilled entering August.


 The usual propensity of mills to cancel orders at the end of the month is unlikely to occur in large volumes to minimize logistics disruptions. Additionally, it could cause yards to prioritize those mills that selected not to cancel orders. Some yard managers believe that negotiations depending on mill needs could limit the downtrend, especially, given the increasing finished steel prices. 


Steel prices have maintained their strength with mill capacity utilization levels gradually increasing to approach 85pc compared to 60.3pc a year ago. Mill order books are solid and lead times are still expanding, moving at eight weeks and up to 12 weeks.


Mills including Nucor, for example, continue announcing further steel price increases with hot-rolled coil (HRC) prices currently trading at $2,005-2,072/mt ($1,820-1,880/nt) fob US mill. This leaves a spread of about $1,400/gt between HRC and prime grade #1 busheling that changed hands at $620-670/gt in and around various Midwest markets last month.


At the beginning of July, HRC prices were reported at $1,873-1,940/mt ($1,720-1,760/nt) fob US mill reflecting a rise of up to $110/nt or $166/mt. Compared to an average price of $1,158/mt in early January, prices have increased an average of 75pc year-to-date. CRC prices continue trending about $220/mt higher than HRC. 


Market participants affected by East Coast activity such as the domestic Philadelphia market are expecting declines at the higher end of the range. Dockside prices on the East Coast have fallen over $20/gt for #1 HMS over the past month from $396/gt for #1 HMS on Jun 29 to $373/gt on Jul 27.


US exports have encountered a downward trajectory in Q3. The Davis Index for US HMS 1&2 (80:20) exports to Turkey is down $28.64/mt to $470.88/mt cfr on Thursday compared to $499.52/mt cfr on Jun 29.


On the West Coast, dealers are encountering lower container and bulk prices from Asian buyers as well. Additionally, some have been selling into the domestic markets in Texas and Central US. Exporters report continued opportunities in Mexico on higher container prices than to Asia but softness in prices from Texas and Southeast in the August trade could also see the import prices softening. 



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