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

The September ferrous scrap trade formally began on Wednesday in Detroit after a major mill in the area announced price increases of $20/gt ($20/mt) for primes, $30/gt for cut grades, and $40/gt for shredded material against August settled prices.


The expected improvements in scrap prices are being supported by slack scrap flows, exports that are firming up, and stronger mill order books. The gap between shredded and primes, which reached a highpoint near $70/gt in June 2020 will narrow substantially in September, possibly to around $5-10/gt in Midwest regions.


The supply of prime grades is adequate at mills, but the consumption of secondary materials is higher than the inflows, causing a greater demand. Midwest area mills such as USS Gary Works have resumed operations while other mills are slowly ramping up production along with scrap buying programs, also adding to demand for obsolete material such as shredded.


In Chicago, the ferrous market has started transacting at prices up around $35-40/gt on cut and shredded grades compared with last month. Primes are still weak, but some early transactions on Wednesday were priced at increases of $15-20/gt.


The South is trending at the same baseline of up $20/gt for primes, $30/gt for cut grades and $40/gt for shredded material compared to August settled prices. Some regions are projecting stronger price gains by $10/gt on these offer ranges with early transactions trading at up $45-50/gt on shredded. Some markets are also pushing towards an increase of $30/gt on primes.


A surge in iron ore prices due to stronger steel demand outlook has also supported higher scrap prices in September. In late August, US mills announced price increases of $40-50/nt on a variety of finished steel products including plate, tube, and flats. 


The uptrends have begun to see deals above $500/nt fob mill on HRC from prior trends of $470-480/nt fob mill. Rebar prices are expected to be raised soon. However, market participants note that the full price increase on finished steel is not expected to be absorbed by buyers in September. The sentiment is positive for Q4 2020, but stronger demand on finished steel goods must be further evidenced prior to steel centers fully restocking inventories. Uncertainty due to the COVID-19 pandemic and domestic policies are taming the positive expectations. 


Global trends of Chinese HRC and plates export prices maintaining high levels, higher prices in Europe for HRC, wire rod, and rebar, along with higher Turkish export offers on finished steel are supporting the market trends in the US. 


Export demand for US-origin scrap increased as Japanese scrap export prices rose, highly influencing the Asian market. On the other hand, scrap prices in the EU and CIS increased on elevated activity in Turkey. 


In the latest deals published on Wednesday, Turkish mills purchased HMS 1&2 (80:20) at $300/mt cfr from short-sea and at $299/mt cfr from the US. The current prices have increased by $14/mt compared to a deal by the same seller out of the US East Coast to a Turkish mill in early August. 


A US scrap deal to Bangladesh traded at $307.50/mt cfr in early August and Bangladeshi buyers are presently receiving offers of $320-325/mt cfr with deals expected at $315-320/mt cfr, which translates to an increase of $7.50-12.50/mt. The containerized market has also been bullish throughout August as prices on both coasts increased $15-30/mt depending on grade compared to early August despite a short-lived buyer slowdown in mid-August.

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