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

US mills could hold off on announcing additional price increases, seeking instead, to maintain official pricing as they navigate possibly volatile demand in Q4 2020.


Mills have been raising prices on various steel products since late-August. On September 11, Davis Index reported price increase announcements on plate and hot-rolled coil (HRC). Steelmakers also announced the second round of increases on flat-rolled, pipe, and tube last week after an initial announcement in August. A first price increase on rebar was announced in September. 


Flat-rolled prices to stay strong in Sept.

Recently, US Steel and USS-POSCO raised spot prices for HRC, cold-rolled coil (CRC), and flat galvanized steel by $60/nt, while other producers increased prices by $50/nt due to supply tightness, extended lead times, higher demand, and higher input costs, especially, for ferrous scrap. 


HRC prices stood at 24.5-26¢/lb ($540-573/mt) fob mill on September 11 and increased by 12pc to 27.5-29¢/lb ($606-639/mt) fob mill this week. Market participants expect September’s demand and prices to remain strong.


Inventory restocking was the main driving force for increased demand this month as service centers sought to delay new orders pending more clarity on COVID-19 trends. As a result, centers placed orders in late August and continued into September. Inventory levels are expected to return to desired balances within six weeks, limiting the expectation of an additional surge in orders in November.


However, the flats market remains concerned over excess supply due to BOF restarts and the lack of strong fundamental steel demand in some sheet sectors, which could result in price retreats in late October. Tubing and pipe demand in non-residential construction and energy are weak compared to the stronger demand from automotive for now. 


Rebar rises on construction activity

Nucor, SDI, and CMC were among the mills that announced Rebar price increases of $40/nt over the past two weeks. Rebar prices currently stand at 29.50-30¢/lb ($650-661/mt) fob mill, up by $55/mt from the bottom of the previous range and by $33/mt from the top of the same range against 27-28.5¢/lb ($595-628/mt) in late August. 


Construction activity is considered relatively strong despite setbacks on postponed or canceled municipal projects. Market participants including rebar fabricators continue to pursue business and invest in equipment, but cautiously. Several are keeping an eye on the risk of another lockdown should a second COVID-19 wave surface in the traditional flu season. Additionally, the US election on November 4, natural disasters such as hurricanes and wildfires are adding to the tentative outlook for Q4 2020. 


Market participants are indifferent to political parties but expressed a preference for whoever continues steel protections gained through Section 232 as well as cooperates with the private sector to make the infrastructure bill a reality to boost economy. 


Market confidence on fully government-funded projects is low considering recent costly bailouts, expensive stimulus packages, and lack of agreement in Congress on the second stimulus plan, but strong support is expressed for public-private partnerships.


Subdued Q4 for ferrous scrap and steel

The rate of orders for HRC is expected to be subdued in November and December until government policies and COVID-19 status become clearer. Rebar orders could continue strong but are affected by seasonality and project budget planning.


US domestic scrap prices in October are also not expected to repeat the September story of $30-55/gt increases depending on grades and region. Both buying and selling market participants are leaning towards an expectation of strong sideways to a $10-20/gt increase in October prices against September settled levels.


US Scrap export prices continue strong with the latest import prices on HMS 1&2 (80:20) at $300/mt cfr Turkey and strong demand from Asian markets on both coasts. Bids from Turkish mills remained steadfast at $290-295/mt cfr Turkey as export and domestic rebar prices soften in the country. Asian buyers have increased scrap buying activity despite higher prices due to domestic demand and recovering economic activity, though these destinations retreated a bit last week. 


In Asia, mills are preferring domestic scrap while others in need of imports are bidding at lower prices. A divide exists between buyer and seller expectations for trade levels. While the high iron ore price levels support the higher scrap prices, concerns over profitability and realized domestic demand is weakening the requirement for US-sourced ferrous imports. 


Finally, the higher domestic prices are presently in tandem with import prices, but further increases would give buyers the opportunity to consider imports. Rebar import prices are near the same levels as domestic prices making the latter a preferred option for most buyers on price, financing terms, and delivery dates. Moving forward, an increase in lead times and in domestic prices would give buyers incentive to seek import options.

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