Monthly ferrous market update: December 2020
- Davis Index’s monthly UK 1&2, 3B and OA ferrous scrap consumer indices climbed by £20-22/mt ($27-29/mt) delivered mill, following the conclusion of mill-yard negotiations in December.
- British steel producers opened negotiations with local suppliers with bids of up £10-15/mt in early December compared with November settled prices, largely tracking developments in the UK dockside markets over the past four weeks.
- The UK dockside markets have been uplifted by robust price developments in major seaborne trade routes, though bulk processors have managed to suppress the extent of these hikes ($27/mt) compared with those in the export markets ($70/mt).
- Low residual ferrous scrap benchmarks witnessed more “muted” hikes relative to obsolete grades given that most domestic steel producers have opted to procure lower grade material over the past month.
- In fact, some local suppliers were even willing to offer concessions on low residual grade prices just to reduce the build-up of material – but they have been faced with flat out rejections despite a willingness to offer discounts.
- Davis’ monthly UK 4A/4C, 8A/8B, and 12A/C ferrous scrap consumer indices increased by £15-20/mt delivered mill, respectively, over the same period. (£1 = $1.33)
- Davis Index’s monthly Spanish consumer ferrous scrap indices increased by €35-50/mt ($42-61/mt) following the conclusion of recent deals in early December.
- Spanish mills were obliged to pay significantly higher for their domestic scrap purchases over the past month as prices tracked developments in the UK and EU shortsea markets.
- Robust Turkish purchasing activity has driven the benchmark HMS 1&2 (80:20) ferrous scrap import index $83.5/mt higher over this period to $380/mt, cfr Turkey, on Dec 8.
- More muted hikes materialized in the Spanish import market as buyers pushed back based on meagre domestic finished steel prices and margins.
- As a result, Spanish import prices for HMS 1&2 (80:20) only jumped €35/mt to €268/mt, cfr northern Spain, over the past four weeks; prompting domestic suppliers to follow suit by similar amounts.
- Moreover, one Spanish scrap buyer commented that they were obliged to pay higher rates for local material to prevent volumes from heading towards the export markets.
- The Davis Index indices for E1 (old thin), E3 (old thick), and E40 (shredded) increased by €35-50/mt delivered in December. (€1 = $ 1.21)
- December price increases for ferrous scrap far surpassed earlier expectations on tight supply and strong mill programs that need ample tonnage to fulfill requirements amid rising steel demand.
- Increases of $70/gt against November settled prices moved a portion of material last week. However, numbers continued to rise, as high as $100/gt, through this week. Several quiet deals adding high premiums, tacked on a further $20-35/gt to the high end of the range especially for prime grades, throughout the Midwest.
- In Philadelphia, prices rose by $50-85/gt delivered mill and scrap prices in Pittsburgh increased by $70-90/gt delivered.
- Many truck shippers were more apt to be up $50/gt, especially in the Philadelphia region, due to regional or freight savings. Rail shipments reeled in the higher values, especially in Detroit and Chicago. In the former, the Davis Index for P&S 5ft increased by $89/gt delivered.
- P&S 5ft in the Chicago area ranged from $360-380/gt delivered Chicago mill. The grade was limited but in high demand in the region like November, with last month’s base price for the grade ranging from $270-305/gt plus delivered.
- In the Southeast, the purchases by Big River Steel led to the high pricing early on. The Davis Indexes increased by $94/gt delivered on #1 busheling and by $88/gt delivered on shredded. The index for #1 HMS increased by $83/gt delivered.
- Like the Midwest, scrap prices in the southeastern US also traded up $70/gt early in the trading week but climbed to $80/gt and more amid a premium on deals this week. Mills in Texas are seeking shredded and #1 busheling at increases of $90-105/gt compared to deals in November.
- In Houston, the Davis Indexes increased by $81/gt delivered for #1 busheling and #1 HMS. The index climbed by $76/gt delivered for P&S 5ft, and by $79/gt delivered for shredded.
- Deals for shredded and #1 busheling were higher as mills eagerly sought those grades for their inventories. Some scrap yards sold early and were out of available inventories while others noted they would be holding on to the limited stock until January trading given the expectation of a further price increase at that time.
- The Davis Indexes in Birmingham increased by $81/gt delivered for #1 busheling while #1 HMS encountered an index increase of $77/gt delivered. In the Carolinas, #1 busheling increased by $66/gt delivered and rose by $60/gt delivered for #1 HMS.
- Metallics imports such as pig iron are currently transacting at $470-480/mt cfr New Orleans indicating an increase of about $100/mt in the material since transaction levels at the beginning of November.
- Market sentiment for January places scrap tags with an additional $20-30/gt above December transactions after a long-running market suppression was followed by surging prices in HRC, exports, and metallic imports amid limited supply.
- Some dealers noted that scrap prices are reaching “inflationary pricing” with mills pushing what was expected to be January pricing in December deals.
- Scrap prices were expected to increase by $100-110/gt in aggregate for the two months. But flow and demand continue out of balance as exports firmed up and domestic intake is reported at 20-30pc lower than the same prior-year period.
- Most mills did not buy all the tons sought even at the elevated prices, which caused what some market participants dubbed the “frenzy and hysteria in December trading.”
- Several dealers noted that flows are increasing dramatically. The bottlenecks expected in January and February could ease after the recent December rises that resulted in increased scale prices at yards.
- Flows are expected to improve by spring, though market participants noted the uncertainty of COVID-19 on their business. One participant noted that some yards may be one COVID-19 case away from shutting down for two weeks or even longer, which would affect total production hours for the month. Additionally, temporary lockdowns in various states may have an influence on January and February scrap feedstock flows.
- Overall, positive market sentiment is forecast for Q1 2021 as domestic mills have full order books and will continue strong production. The higher prices on finished steel may influence imported steel decisions in Q2 2021, which could dampen prices.
- The Canadian December ferrous scrap trading settled on Thursday with surges of C$80-100/nt on prime grades and C$50-90/nt on cut grades.
- Limited supply and strong demand trends dominated the week, with high demand for prime grades from mills, especially in the Toronto region.
- In Toronto, P&S 5ft initially transacted up C$70/nt following the price rises in the US’ Detroit and Chicago regions, before increasing by as much as C$90/nt or more, after being influenced by the soaring prices in Chicago and the Midwest.
- Depending on mill, price increases for the grade held the approximate price gap between P&S 5ft and Shredded at about C$10/nt, the same as November.
- The monthly Davis Index for prime grades in Toronto surged by over C$100/nt with #1 bundles up by C$103/nt delivered and increasing by C$108/nt delivered for #1 busheling.
- The index for #1 HMS rose by C$81/nt delivered, while machine shop turnings increased by C$93/nt delivered mill and Shredded climbed by C$88/nt delivered.
- The monthly Davis Index for P&S 5ft in Toronto increased by C$92/nt delivered, as some mills paid C$70-90/nt over November settled pricing for the grade.
- Prices in Montreal increased for all grades with #1 busheling rising by $80/nt delivered mill and #1 HMS ticking up by C$74/nt delivered. Machine shop turnings rose by C$75/nt, P&S 5ft increased by C$80/nt, and Shredder feed climbed by C$58/nt all on a delivered mill basis.
- A robust export market, scarce supply, and a ramp-up in demand for finished steel are likely to keep prices elevated into January, following the trends in the US, which place January scrap tags $20-30/gt above December settled prices. ($1=C$1.27)