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

US domestic scrap prices, which had last increased in January, fell in February and trended sideways in March with only primes gaining $10/gt in most regions. For April, market participants expect a downward market that could result in ferrous scrap prices decreasing by $20-30/gt compared to March settled prices. 


Buyers and suppliers throughout the country are communicating a dim outlook for ferrous price movements into April as global and domestic reasons intertwine. Market uncertainty looms big on the economy given the unforeseen effects from the spread of the COVID-19 virus and oil prices. 


Small volume trades during the second week in March are now $10/gt below early March trading week’s settled prices. Consumers and scrap yard dealers have told Davis Index, the downtrend is considered almost certain.


Weak domestic market

Weak domestic market conditions have led companies like Gerdau to announce the idling of two longs mills. Hot rolled coil (HRC) has plunged below the 29¢/lb ($580/nt, $639/mt) fob mill threshold as deals on large quantities were indicated at 27¢/lb ($540/nt, $595/mt) fob mill in late February. 


Various mills announced an increase by $40/nt ($44/mt) on flat rolled base offer prices of $580-600/nt ($639-661/mt) fob mill by early March to support buying prices, but the attempted increase saw only small movements this week. 


Steel buyers have proceeded with necessary replenishments but the uncertainty of the coronavirus as well as outlook for US domestic segments such as automobile, construction, and oil drilling are making them hesitant. Oil prices declined by 30pc as the Saudi-Russia price war began this week after Saudi Arabia announced an increase in output after an impasse with Russia at OPEC negotiations.


Ferrous scrap feedstock has decreased at some scrap yards on declining buying prices with a market participant telling Davis Index that his yard was seeing “just enough” feedstock coming in to keep the team working and not initiate any layoffs. 


During the March scrap buying week, mills held steadfast to initial offers as supply was more than adequate at the sideways price on cuts and shredded with a $10/gt increase on prime grades compared to February settled prices. Scrap traders tried to hold off for an increase of $10-20/gt but the mill offers began to gain momentum within the day on Wednesday with most purchases completed by Friday.


Soft exports

Ferrous scrap export prices continue under pressure as Japanese ferrous scrap prices soften the Asian markets and the largest importing destinations such as South Korea and Taiwan face weak domestic demand on finished steel products. 


South Korean billet is also being exported to Taiwan, which will further compete with imported scrap demand. Turkey returned to the market this week for April shipments but at lower deal prices prior to the recent period of inactivity. The last US-origin scrap deal on HMS 1&2 (80:20) was recorded at $280/mt cfr Turkey around February 21. The last four deals that surfaced this week decreased the Davis Index for Turkish import of US-origin HMS 1&2 (80:20) to $272.87/mt cfr.

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