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

The US ferrous scrap trade for July commenced on Wednesday morning, after a few Detroit area mills came out with bids of up $20/gt on prime grades such as #1 busheling and unchanged price levels for secondary grades, including shredded, over June’s settled numbers.


The announcements are consistent with earlier projections of sideways to up $20-30/gt with price boosts anticipated even though scrap flows are healthy and summer months historically do not bring upturns. Surrounding markets are expected to transact through the week at similar price indications as initiated on Wednesday although price resistance on grades such as P&S 5ft could see some regions gaining $10/gt on deals.


Key factors leading to the upward scrap price trajectory include the ongoing tightness of primes, transportation difficulties, sustained exports with intervals, and strong steel production along with finished steel prices that continue to climb.


The US crude steel capacity utilization rate has reached 83pc in the US, compared to 58.3pc a year ago and 82.7pc a week ago. The Midwest is the weekly frontrunner on the latest steel output as production surged by 71.2pc to 202,000nt, versus output from a year prior. Steel output in the Midwest is up 3.1pc compared to 196,000nt a week earlier.


Exports have driven a dampened sentiment after showing little movement for about two months, though price levels have held firm. Still, sluggish export activity may impact domestic pricing in surrounding areas near the East Coast as dockside prices moved down about $10/gt last week and a further $5/gt this week. Sellers are forecasting additional dockside decreases.


Philadelphia area sellers, affected by exports, have also noted domestic steel mills have had reduced scrap buying programs, leading region participants to expect less growth in July domestic prices compared to other regions.


In the South and Southeast, market participants are reporting strong demand, adequate supplies, and tight demolition feedstock that may see P&S 5ft achieve $10/gt gains against June settled prices and mills treading lightly on increasing offers due to maintenance schedule changes and higher input costs. Prior to the trading week, several sellers noted that #1 HMS is at risk for slight price erosion, especially, in regions influenced by limited exports and more than sufficient feedstocks. 


Several market participants note that given the high finished steel prices along with high global iron ore prices, ferrous scrap should be trending slightly higher but mills are managing profitability tightly. Mills are also planning maintenance outages for August, September into Q4 2021.


Most market participants anticipate a strong, balanced ferrous market for the remainder of the year. Section 232 is under discussion by the Biden Administration, but major changes are not expected in the year. 

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