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

Ferrous scrap trading commenced in the US on Sep 2 after a few major Midwest mills bid $25/gt down for secondary grades including shredded and $50/gt less for primes such as #1 busheling against August settlements.


Some reports on Sep 1 indicated mills would begin buying early, ahead of the Labor Day holiday on Sep 6, if desired numbers were achieved. Area participants believe trade may move quickly and possibly settle most deals or at least price-to-be-determined contracts (TBDs) by Friday rather than drag business into the middle of next week. The downtrend on oversupply is motivating sellers to engage today and place material early in the cycle. 


A few participants have noted that apart from the Labor Day holiday, the observance of the Rosh Hashanah holiday through Sep 8 must also be kept in mind as it may also lead to delays. These upcoming holidays are contributing to the overall urgency this week as market participants prefer to avoid dragging settlements beyond this time. However, the full completion of the September trade cycle will inevitably carry into next week.


Secondary grades that include #1 HMS, P&S 5ft, machine shop turnings, and shredded continue to overhang the market. Moreover, several mill outages are presently taking place or on the horizon this fall, which may continue to pressure prices down until the end of 2021. The expectation of an upward market is waning for October, but some sellers continue to hope for an uptick towards year-end. 


Steel mill downtime is also projected to reduce steel production that has been churning away at or near 85pc capacity utilization since July, another element that does not help the scrap oversupply situation for now. However, ferrous scrap sales are facing some supply chain constrictions, freight and logistics issues especially concerning traffic backed up by the Nola port shut down due to Hurricane Ida


Logistics are also affecting the finished steel supply chain. Finished steel mills continue hiking prices on reinforced bar and flat steel. Hot-rolled (HRC) prices continue inching up at $2,072-2,116/mt ($1,880-1,920/nt), higher by $44-66/mt compared to a week ago. Some deals have been heard as high as $2,127/mt ($1,930/nt). Still, iron ore price declines, high inventories, and soft export market have deviated the trend for ferrous scrap prices. 


Based on the trending values, prime grades will revert to pre-June levels and give back gains made over the past three months that were led by the semiconductor chip shortage and related automotive industry slowdowns.


The updated numbers will mean #1 busheling averages will drop to approximately $595/gt delivered Detroit consumer and about $580/gt delivered in Chicago. Shredded will fall to $460/gt delivered Detroit mill while Chicago shredded could end near $455/gt delivered.


The Southeast may encounter slightly more muted losses on prime grades such as #1 busheling given the price erosion last month, but some as far as Texas are reporting the possibility of slightly higher losses than $25/gt on cuts and shredded due to high scrap inventories in some regions. 

Leave a Reply

Your email address will not be published.