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

Ferrous scrap trading finalized in several markets before the weekend while others extended into this week with some lingering activity concluding on Tuesday. The $50-70/gt price increase was widely accepted with certain higher-demand regions paying various premiums to that base level.


The Chicago and Philadelphia markets were described as less bullish than Indianapolis and some Southern markets as these regions completed business early and quickly. The Davis Index moved up by $73/gt for #1 busheling to $553/gt delivered Chicago consumer. #1 HMS rose by $52/gt to $422/gt delivered, while machine shop turnings increased by $46/gt to $342/gt delivered. P&S 5ft and shredded rose by $51/gt to $463/gt delivered and $453/gt delivered, respectively, in March.


A consumer that experienced weather-related difficulty during February ended with lowered retail item volumes, within the Indianapolis-Cincinnati to Detroit area. This led to a shortage of internally available material forcing the mill to pay above market to draw in rail tons from outside regions.


The Davis Index increased by $76/gt to $541/gt for #1 busheling delivered Cincinnati/Indianapolis consumer with the prime grades’ full transactions ranging from $$515-550/gt. The monthly index for #1 HMS rose by $55/gt to $403/gt with some numbers as high as $445/gt. P&S 5ft moved up by $52/gt to $425/gt with some premium, remote material approaching $475/gt.


In Cleveland, the monthly Davis Index for #1 busheling increased by $68/gt to $586/gt delivered, while #1 HMS rose by $50/gt to $420/gt. Machine shop turnings moved up by $47/gt to $321/gt and shredded increased by $51/gt to $454/gt delivered Cleveland/Youngstown consumer.


Pittsburgh and Quad Cities completed trading on Monday. Buffalo dealer prices were in tandem with surrounding market jumps at up $70/gt for #1 busheling to $545/gt fob dealer, while #1 HMS rose by $47/gt to $392/gt fob Buffalo dealer. P&S increased by $50/gt to $430/gt fob.


The trend of $50-70/gt continued in the Southeast. Birmingham area encountered an increase of $71/gt on #1 busheling to $565/gt delivered, and a rise of $48/gt on #1 HMS to $408/gt delivered as P&S 5ft increased by $51/gt to $429/gt delivered, and shredded rose by $50/gt to $445/gt delivered.


The Texas market did not follow the national trend with deals finalizing on Tuesday at only an increase of $10-20/gt against February settled prices. Some mills with sufficient inventories offered buying prices at sideways with most sellers denying volumes. 


Larger dealers reported being shocked at the sideways offers that later ended in deals at up $10-20/gt compared to the previous month. Texas was affected by winter storms that impacted the state’s electrical grid and caused 1–2-week downtimes in production at mills and scrap yards. 


April sentiment

Market sentiment for April is pointing to another strong market as participants see the price momentum continuing into next month. Early projections place April scrap prices at strong sideways with potential upsides. 


Demand is projected to remain healthy with strong exports, full order books, low mill inventories, and record high hot-rolled coil (HRC) prices that have led to the vast spread between HRC and #1 busheling. However, scrap flows are muted, especially for prime grades amid the continued microchip shortage.


The fall in iron ore spot and futures prices on Tuesday has added an additional dimension. The overseas market seems to be softening or hesitating on news of declining prices in China due to a first-level red emissions alert in Tangshan. Steel prices in the country have also softened. The longer-term effect is unknown as production restrictions were also issued in the region which may balance supply and demand. 


Some market participants anticipate more production suspensions in Tangshan and potentially in other Chinese regions, which may further affect iron ore prices. On the US West Coast, the drop in iron ore prices has caused buying mills to hold back on deals pending further information. If the situation persists, export scrap prices from the US may begin to soften. Additionally, any changes in export volume demand may weaken the expectations in the US April trading period. Overall, scrap demand and prices are expected to remain strong through H1 2021.

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