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

US domestic ferrous scrap trading kicked off mid-day Tuesday when two of Detroit area’s five major mills announced an April price decrease of $30/gt for prime grades and $50/gt for shredded and cut grades because of reduced melting requirements. 


Gerdau’s idled mills in Monroe and Jackson, Michigan are expected to resume by April 20, although that date could be pushed.


Market participants in Detroit and surrounding areas anticipate resistance; some won’t sell at the announced price decreases. Sellers reported little yard inventory and have no expectation of April inbound material because of prices and industry stoppages. 


Several mills are taking outages, using internal inventories, or have no April buying programs—and many have had steel order cancelations. Many scrap dealers across the US are closed to the general public, while flow from prime generation—which mainly comes from manufacturing, like the automotive sector—has dropped by 30-100pc.


The volume of material transacting at announced levels has been unclear and market participants aren’t sure if all regions will follow Detroit’s price direction, despite the surrounding Midwest markets also transacting on Wednesday. In some regions, trading is taking place at $30-45/gt decreases compared to March. The South, which is softer, is slated to begin trading on Thursday, with expectations of a $50/gt decrease for obsoletes and little, if any, demand for prime.


Market participants surveyed suggest prime grades may move at declines of $10-20/gt, with obsoletes more likely to flow at drops of $20-40/gt. Some have reported foundry prime grades being sideways compared to March settlements.


Canadian mills have also reduced their melt programs, and can use their inventories to cover light order books, if they so choose. The Canadian markets are projected to settle on Thursday or Friday.


Ivaco rolling mill first announced its L’Orignal plant in Canada would cut production by April 28 because of waning market conditions, overcapacity, and tariffs adversely affecting exports to the US. The mill has an annual steel billet output capacity of 625,000nt and wire rod capacity of 900,000nt. 


Ivaco’s melt shop was idled over the weekend, and while resumption dates have been set at April 13 and April 20 for the rod shop, the shutdowns could be extended. The company also recently announced temporary and permanent layoffs. According to market participants, most of the staff, save for managers, have been made redundant.


Economics seemingly support price renewal, with inbound scrap flow taking the hardest hit because flow is considered much weaker than demand. Some steel mills are still running well, like ArcelorMittal Weirton’s tin plate operations, mills outside of special bar quality plants, and oil country tubular goods plants—all despite COVID-19. 

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