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

The market sentiment is mixed for May ferrous scrap trade with price variance based on region and grade. Consensus points to a sideways market with an upward potential. Busheling is in tight supply and price increases that materialize for primes will likely buoy shredded and other obsolete scrap grades.


A seller in New York has received domestic offers for prime at $35-40/gt above April settled prices. The move along with reported small purchases of busheling at higher prices in the Midwest on Monday is giving support to the upward sentiment. 


Many mills have May melt plan meetings later this week. A few are reporting a lack of urgency and may wait to plan until next week. However, most mills are reportedly operating at 40pc on average, which creates enough demand to surpass scrap supply in many regions.


Primes are expected to trade next week at flat to $40/gt above April prices while obsoletes are projected to trade at sideways to up $30/gt in some pockets. The market is fragmented with higher prices in Midwest and East Coast but markets in the South and Southeast do not look as strong. 


Mill demand is soft, however flow into the yards in some regions is reportedly softer than mill buying programs, like last month. Some yards are seeing 30-50pc less flow in May compared to April and consequently, will have less supply to offer. Fewer buyers in the market with low scrap flows into yards mills looking for material are expected to pay price increases. If local scrap is unavailable to fulfil the few consumer requests, material may need to be purchased remotely with added premiums for freight.


Mills buyers in the South are reporting enough scrap availability in those areas to meet demand. However, several scrap dealers believe that the tightness is sufficient to boost shredded and obsoletes by $10-15/gt in the South. 


EAF consumers looking for busheling may need to consider alternative grades such as pig iron. However, prompt basic pig iron (BPI) is in tight supply with May and June production orders in place with China. US BPI supply is not expected to open until July.


Also, the spread between busheling and hot rolled coil, ideally would be below $180/nt for EAFs to profit. HRC prices are around $470-490/nt, heading downward toward $450/nt. At that level, busheling would be relatively high priced at or above $300/gt ($270/nt).


Some exporters are still completing prior months’ orders at higher prices and East Coast collection prices offered early this week are at increases of about $15-25/gt above last week. 


Automaker restarts, especially the big three, are projected to impact May pricing in Detroit based on whether they resume in early or late May.  An early May restart can push up shredded and busheling scrap prices, which are the tightest, by guiding the mills to buy those materials during the trade as it would coincide with restart timing. However, mid- to late-May auto restarts may cause mills to use their inventory in the interim and delay purchases until June.


Depending on cash flow needs, and the present depressed pricing situation, some dealers are stockpiling unprocessed material with limited crews, which can be ready for the expected improved June buying period.


Among mill production cuts, US Steel is planning to hot idle its No. 6 blast furnace in Gary, Indiana and No. 1 blast furnace at Mon Valley works in Philadelphia this week, according to sources. These events would mark USS’s sixth sheet supply cut since the end of March.


Last week, ArcelorMittal hot idled its “C” blast furnace in Burns Harbor, its largest single furnace to idle. The idling is expected to last one more week.


Sterling Steel in Quad Cities has been running at 50pc output capacity and, per sources, is planning to curtail production further in May, with improvement projected by July 2020.  NLMK in Indiana had no purchase requirements during April trade.


Gerdau in Ft. Smith, Arkansas is still not receiving ferrous scrap, first announced on March 20, however, it plans to honor unfulfilled orders from March, when able.


Philadelphia respondents see a return in parity of supply & demand for May; some sellers are receiving requests for material by mills that came up short on their April buy, however, there is an unmistakable lack of supply in the market, to accommodate these inquiries.


Some deals were reported in the Midwest mid-month on busheling sales at $10-15/gt above April settlements due to material shortage, however market participants don’t see this as an indication yet on May settled prices as mills continue to curtail production to adjust to declining order books.


On the sell side, several have expressed that they expect to see some price returns, whether partial or full on May vs April losses, according to sources. Though they plan to sell little because of low volumes, or efforts to build inventory for future gains when markets rebound.


Shredder and processing yards throughout the US have discussed raising intake feed prices by $10-30/gt to general material flow that has been scarce, which would have impact on settled pricing next week, however many market participants note how quickly sentiment has been changing during this time. 


Generally, market participants see a protracted, repeat of April in trying to determine applicable pricing based on pockets of demand and whether yards have material on the ground or on the way.

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