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

Prices of hot-rolled coil (HRC) are likely to trend south after restocking in October-November if the current downstream economic environment does not change.


Late last week, Atlas, Nucor, Welded Tube and other companies that consume flat-rolled steel announced the third round of tube price increases. However, the prices for steel beams in the US were flat for the week ended September 25 as Nucor did not join other mills’ efforts to increase prices on the product line. 


Additional price increases are having a limited effect on market participants. Moreover, buyers are likely to get more access to flat steel with more capacity expected online in the latter part of Q4 2020. The end of the quarter will have thus restored production from unplanned outages and restarts from planned ones.


HRC prices currently stand at $617-661/mt in the US, up $11-22/mt from $606-639/mt fob mill reported by Davis Index on September 16. In fact, HRC prices have moved up by about $170-190/mt since early August. 


Steel centers restocking and improved industrial production schedules supported prices in September with lead times increasing to 8-9 weeks in September from 3-4 weeks in August. 


Scrap prices support finished steel

Finished steel prices received support in September from higher input prices as scrap prices rose by $30-55/gt in the early September trading week, depending on region and grade. October scrap expectations continue at strong sideways to an effective $10-20/gt increase against September settled prices also depending on grade and region. Prime grades could encounter a higher gain in comparison to cuts and fragmented scrap. 


Scrap inflows in September are reported as materially better than those in August. Export demand softened on higher export prices both at bulk and container levels. Turkey remained silent for several weeks while Asian buyers are planning cautiously considering softer billet prices, weak domestic finished steel prices, lower domestic scrap prices at times, and the cautious tale of China’s fluctuating prices on Asia. 


Bids from the Turkish mills are being heard at $290-295/mt cfr for HMS 1&2 (80:20) in negotiations for November shipments, with sellers expecting at minimum the status quo of $300/mt cfr maintained throughout September. Several bulk dealers in the EU and US have expressed the possibility that deals to Turkey could see prices tick up int he next round of negotiations. 


Views diverge for November

Opinions vary on the outlook for the scrap market in November. Some participants believe that mills could stall and hold prices in October, which will only make consumers pay up in the November market. Scrap flows at the end of Q4 2020 will not keep up with mill melting demands in this scenario.


On the other hand, some market participants fear that a strong sideways to up $20/gt scrap price movement in October against September prices could see scrap prices soften in November trading. The soft sideways November outlook is rationalized by fewer restocking orders on sufficient inventories, lower seasonal demand, continued weak economic recovery, and the uncertainty from the potential results of the US Presidential election in that month.

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