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

The US October ferrous scrap trade began on Tuesday afternoon following the official announcement made by a few Detroit area mills at unchanged price offerings across all grades, compared to September settlements.


The news came as a surprise for several sellers who were planning to see a $10-20/gt growth for prime grades (#1 busheling), though the flat pricing for secondary grades (HMS 1&2 (80:20), P&S 5ft, shredded)  met the prior expectation.


The Midwest and the Southern regions began trading soon after Detroit, following the price direction set by the mills there. As a result, transactions in Chicago and Alabama had progressed with no change in prices for most grades, including primes by Wednesday morning.


Trading close to the East Coast is trending down by about $10/gt for obsolete grades due to weakened exports over the past month while scrap flows have risen. Dockside collection prices declined by about $10-20/gt over the past 30 days.


Markets across Pennsylvania were trending down by $5/gt for most grades on Wednesday, while Southeastern markets were predominantly flat to down by $5-10/gt along the eastern coastline.


In Canada, Dofasco which typically enters the market following outcome in the US, entered the market Wednesday at up C$4/nt ($3.38/gt) for prime and kept its price unchanged for secondary grades.


One seller who hoped to see gains this week described Wednesday’s price activity as the ‘nail in the coffin’ for upward mobility in Q4 2020. While many mills are meeting tonnage requirements without difficulty, some hesitate to settle, mainly in areas that paid premium prices for material in September, creating some contention on base prices.


Prime materials increased by about $30/gt over the past 60 days, which was described by some as ‘not enough’ in contrast to steel price increase announcements. However, steelmakers have some catching up to do as they obtain lowered realized prices compared with offer levels. Some Midwest mills report a gap of about $40/nt between deals and effective base prices.


The steelmakers feel tonnage requirements for October can be met at flat pricing. Steel production is slowly inching up by 0.3pc from last week and 2.4pc from two weeks ago. However, production is down by about 18pc compared to the same week in 2019. Operating rates are close to 67pc, compared to 78pc at the same time last year.


Jerome Powell, chairman of the US Federal Reserve, urged policymakers to provide more economic and fiscal stimulus for the US economy in a virtual meeting of the National Association for Business Economics on Oct 6. Powell noted the improved jobless rate fell to 7.9pc in September from a pandemic peak of 14.7pc, but that a lack of stimulus will weaken the economic recovery. Powell also warned that the second wave of COVID-19 could produce serious negative consequences on the US economy.


Given the sideways to soft trends in the scrap market this month, there is a growing consensus that weakness will continue in the steel markets because of which scrap prices could trend down in November.


($1 = C$1.33)

Leave a Reply

Your email address will not be published.