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

US domestic scrap prices could move up in March on strong domestic mill demand, climbing export prices, and inclement weather slowing down the scrap flows into yards. 


In February, ferrous scrap for secondary grades such as #1 HMS, P&S 5ft, and shredded declined by $50-70/gt depending on the region with prime grades trading flat compared to January settled prices. 


Expectations for March from market participants at the end of February’s trading ranged from sideways to up $10-20/gt. Some were even skeptical of a flat trading month and expressed the risk of a limited price erosion in March. 


However, the past week’s extreme weather conditions throughout the US have added support to the positive pricing expectations in March. Some in the South note that the region could see an increase of $30-40/gt in the region against February settled prices while others limit the increase expectation to $20-30/gt on secondary grades since both scrap collection and mill activity has been affected. 


In the Midwest, some participants view weather-related impacts disrupting secondary material flows as enough to elevate the prices as much as $25-30/gt for those grades with primes possibly holding firm at sideways to up by $10/gt.


Mills in the Midwest are reporting business as normal given that the region is used to the current weather conditions. The effect is being felt more seriously in the South that does not normally experience such extreme weather. The supply and demand stressors will affect regional price movements in March. According to the American Iron and Steel Institute, the South comprises 42pc of total US steel production so the weather may affect a large portion of the US steel and scrap industry. 


The southern region including states such as Kansas, Mississippi, Oklahoma, and Texas have been hit with unprecedented cold fronts. Davis Index has been informed that scrap yards throughout Mississippi, for example, have been closed since Monday and remain closed into today with hopes of resuming some operating hours next week. 


Some mills are dipping into inventories and scrap deliveries are lagging, while others report a well-stocked status with limited buying volumes planned for March. Steel mills in Mississippi and Texas are reported running furnaces intermittently due to the power outage cycles in those areas. 


Shredders in Ohio and other Midwest states have reportedly increased prices by $15/gt over the week with potentially higher increases into March as export prices firm up and if weather conditions severely hamper scrap in the South. The higher feedstock buying price will support the stronger prices to mills.


The price increase may, on the surface, be considered a positive for scrap yards, but Southeast-based scrap dealers are not excited at the prospect as they foresee February orders filling in March on delayed delivery schedules. Scrap yards will also face the challenge of losing a day or two even after a return to normal operations trying to restart and perform maintenance on equipment.


Steel deliveries from mills also face potential supply chain disruptions. Rolling blackouts affecting both the mill and employment resources have some mills delaying production schedules. Electricity and natural gas curtailments are limiting plant production and those mills’ ability to guarantee deliveries. Transportation, both into the mills for raw materials deliveries and exit of finished steel is being widely affected in areas being hit by ice and snow. 


A spokesperson for US Steel noted that some of the company’s plants have been affected by weather-related impacts on operations but that will not materially impact the company’s ability to fulfill scheduled customer orders. 


In Arkansas, the base to Big River Steel, energy concerns may influence temporary shutdowns at electric arc furnace-based mills according to sources. In Texas, a mill source noted that they hope for utilities to all businesses and homes by the weekend. It could take several weeks for impacted steel producers to catch on lost production and lagging shipments.


Snow and freezing conditions may have longer-lasting effects on productivity in the South if pipelines are broken and basic energy infrastructure needs large repairs.


The winter storms have also affected the Port of Houston which has remained closed since Feb 15 due to the inclement weather, resulting in no power or water lines working at terminals. Other freight terminals that have shut down include Bayport and Barbours Cut Containers Terminals and Turning Basin Terminal. Limited segments remain open to some stevedores and tenants.

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