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

September ferrous scrap trading is anticipated to commence in the US following the Labor Day Holiday, on Sep 6, with downward price pressure expected across all grades and regions, as supply abounds. 


Some regions could see more aggressive to-be-determined (TBD) negotiations next week given the still high ferrous demand from mills trending at high capacity utilization. Market participants gauge that the best scenario may bring unchanged prices compared to August though many foresee either soft sideways levels or potentially, a further decay as exports, pig iron, and iron ore prices have slipped.


Opinions on downside levels against August settled prices range from decreases of $10-40/gt on prime grades like #1 busheling and down $10-50/gt on secondary grades such as #1 HMS. Further declines are being promoted by some large buyers claiming higher regional scrap inventories, while the majority of sellers do not see deeper decreases as realistic. Any price decay on prime will indicate its first drop in over a year when primes fell $10-30/gt in August 2020.


The sell-side sentiment is not overly pessimistic because the bearish outlook is deemed temporary as steel prices maintain strength and mills report that order books remain full amid thriving sales. Steel capacity utilization rates are holding steady at 85pc, as lead times extend as well. Market participants noted the possibility of gains against the preceding month’s settled prices in October and November.


Waning price projections at present are mostly linked with mill maintenance outages by US Steel, for example, that are limiting scrap needs and may lead to possible order cancellations. Cleveland-Cliffs is also set to idle its large blast furnace No. 7 for maintenance beginning Sep 1 to conduct planned revamping work.


Scrap yards witnessed strong intake flows even with the $20/gt downside last month and an additional $20/gt decline heard over the past few weeks in some regions. Scrap supply and flows have outpaced mill demand causing abundant material to accrue with limited options for placement of the accumulating scrap in the short term. 


According to a mill source, despite higher finished steel sales, scrap input pricing can fall in September on sheer supply and demand dynamics given the temporary oversupply. Yet, some scrap yards in Texas and Alabama have noted that their intake and processed inventories are running low.


Auto shutdowns continue to curb prime grade generation. However, mills seem to have met their current #1 busheling needs. Primes mostly held flat last month; though, mill buyers tested taking the price down while August trading progressed. In fact, the Ohio valley region saw several #1 busheling consumers sit out during August trading. Their plans for September buying were still unclear on Friday.


Basic pig iron imports have upheld exceptional price strength since the end of 2020 hitting a high point of $694/mt cfr Nola in May 2021. The prime alternative gradually decreased thereafter, with the sharpest declines occurring since July, and falling to $545/mt cfr Nola on Aug 27 on oversupply and lack of demand for additional prime in the US. Moreover, iron ore spot prices have declined to near $150/mt cfr China for Fe 62pc at present from $183/mt cfr on Aug 3.


HRC pricing seemed to have hit a lull on Friday but reached as high as $2,116/mt ($1,920/nt) this week with most transactions more in the range of $2,050-$2,094/mt ($1,860-1,900/nt) depending on volumes, up $22-44/mt compared to $2,006-$2,072/mt ($1,820-1,880/nt) on Aug 3.


Turkish imports of US-origin HMS 1&2 (80:20) declined by $31.62/mt to $447.76/mt cfr on Friday compared to $479.38/mt cfr on Jul 27 on persisting weak demand and activity. Export markets have been gradually slackening since mid- to late-June when US export HMS 1&2 (80:20) started to fall below the $500/mt point to $497.50/mt cfr on Jun 22. Export buyers from other regions such as India, Bangladesh, and Vietnam reduced imported ferrous demands on COVID-19 lockdowns, uncertainty given the resulting economic slowness, and seasonality. 

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