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

June trading began on Tuesday afternoon after a few Detroit area mills announced month-on-month price increases of $10/gt on prime grades. The supply tightness in prime grades from low industrial production is supporting the $10-20/gt upside potential for the grade.


Secondary cut grades were flat in initial trading while shredded, turnings, and some other obsolete grades in lesser demand, decreased by $10/gt compared to May settled prices. 


Lower offers for shredded from mills, compared to May settled prices, was a surprising movement that led to the decrease in the prices for the grade. Market participants report that more than sufficient shredded material was offered to mill buyers through the last week of discussions. 


The overall price announcements, however, were in line with expectations on Tuesday as market participants projected a generally sideways-strong market. 


Dealers have expressed willingness to sell cuts and prime grades at offer levels, however, they may resist the $10/gt drop in shredded. 


However, it is still early in the trading week and some participants are opting for patience instead of swift trades in the anticipation of further upside potential for prime material due to demand and reduced automotive stamping generation. On the other hand, some sellers note that an overhang on shredded inventories could likely put a $10-20/gt downward pressure on effective trades on the grade, depending on region and mill, because of a correction driven by lower demand and reduced need for springboard deals. 


Other Midwest markets are expected to follow Detroit pricing with Ohio Valley projected to have the weakest demand, while the southeastern region in the US was heard to be strongest. Markets will have regional variance, like the past two months, where final prices depended on specific mill production levels and corresponding grade requirements.


Scrap flows have been improving due to normal seasonality, resumption of market activity and low sales since March. Yet, scrap supply is still described as scarce by several market participants and several shredders have been forced to raise intake feed pricing, regardless of low demand, to boost flows.


Short lead times, some as low as 2-3 weeks, continue to vex US steel mills. Order books are limited, as mills persist in trying to recover from several steel order cancellations over the past few months. HRC pricing is projected to reach $510-515/nt in June compared to May levels of around $470/nt.

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