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

Ferrous scrap trading is expected to commence in the US on September 1 and wrap up prior to the Labor Day Holiday. Prices are set to increase by $20-30/gt on all grades, due to healthier mill order books and strong exports with continued tight scrap inflows to yards. 


Secondary ferrous grades could potentially witness the highest gains in some areas, with prices for all grades likely to move upwards depending on the region. However, mills report strong prime grade inventory, which may slightly dampen the level of upward movement for those grades.


Market participants report a gradual, but steady improvement in scrap prices that could continue trending up through the end of 2020 and beyond. Scrap prices have room to rise following severe declines that began in March.


Chicago busheling was around $300/gt delivered to consumer in Jan 2020 then fell in net through the next eight months to reach $265/gt delivered during August trading. The Midwest, which was severely weakened due to industry slowdown during Q2 2020, is recovering with mills picking up the pace to fulfill new, increasing orders from the automotive sector.

Hurricane Laura is said to have had a limited impact on logistics along the lower Mississippi River and New Orleans port, and therefore no price pressure is expected from these regions on the upcoming trading week. Freight truck prices in the region have increased, however, and will also factor into delivered prices. Rail prices in some regions on the West Coast are also increasing.


Finished steel prices rose in late August 

The finished steel price increase announcements in late-August are adding forward motion to September trade. Several steelmakers including Nucor, SSAB, and ArcelorMittal increased base price offers for plate and sheet steel by $40/nt ($44/mt), placing the suggested floor prices at $560/nt fob mill for sheet, targeting $540/nt fob mill for HRC, and $740/nt fob mills for cold-rolled steel. 


HRC deal pricing has room to increase as spot prices are estimated at around $470-$480/nt fob mill. Sales teams at several mills inform Davis Index that higher scrap prices should provide fundamental support for better finished steel rate movements though the full price increase is not expected. 


Structural tube mills also joined the price increase announcements raising their rates by $40-50/nt as flat steel prices increased. Energy pipe prices, though, are not expected to move up in the short-term due to high inventories and limited demand. 


Longs have yet to announce price increases but with higher scrap prices, several rebar fabricators believe that rebar prices could tick up from the 27-28.5¢/lb ($595-628/mt) range that has been predominant through August. Adding support is the fact that import rates are at higher levels due to better Turkish scrap import prices and because higher prices in Mexico are retaining volumes domestically that were previously available for export to the US. Domestic mills are also actively working with buyers on credit terms, thereby, making domestic mill purchases more attractive. 


Finished steel prices: Limited H2 2020 outlook 

Speaking with market participants the upcoming presidential election may delay finished steel’s upward mobility until late Q4 2020 or into Q1 2021. While the price increases are expected to firm up finished steel prices in September, especially, due to support as service centers restock thin inventories, doubt surrounds a continued upward trend in Q4 2020. 


In fact, flat sheet prices are expected to remain mostly level for the remainder of 2020 and could begin to rise slightly on further clarity along with stimulus investments in Q1 2021. Mills may seek to further increase finished steel prices due to tight scrap inventories, higher domestic scrap prices, and better export scrap prices, but the fundamental strength from domestic demand given the available production capacity is only expected to support a subtle upward move through H2 2020 on continued uncertainty from the COVID-19 pandemic.

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