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

The ferrous scrap trade for May is ready to kick off this week and industry sources anticipate prices to remain within current ranges with potential upsides. The market appears to be in overall balance with no chief indicators that suggest sizeable price movements.


Secondary grades such as #1 HMS are projected to remain flat or increase up to $10-20/gt against April settled prices on export strength. A limited number of market participants believed that shredded should be increasing up to $30/gt. Prime grades will stay flat with an upward potential of about $5-10/gt. The gap between prime grade #1 busheling and shredded remains large, which will temper the potential increase in prime grades.


The continuing prime scrap shortage due to auto manufacturing slowdowns is reportedly strengthening its prices. However, rising prices will not bring more #1 busheling into the market. Increased consumption of shredded scrap as a replacement for busheling in melting formulas at flat mills should bayou the grade. Scrap flows are restricted in certain areas due to logistics constraints that are hindering the movement of secondary grades.


Still, secondary grades in other regions are reportedly ample with abundant flows. Shredded, also in ample supply, will be used as a prime replacement along with pig iron, though fewer amounts of the latter will be offered into the May market due to limited availability. 


The Texas region is anticipated to trend sideways to slightly up, but participants report a rumor that some mills are murmuring the potential for down $10/gt against April settled prices on sufficient scrap volumes offered and adequate mill inventories. Mexican mills have been facing stronger domestic scrap prices and may continue with strong scrap buying plans that will draw scrap flows from the Southwest and Texas. 


Mills are quiet though no prior scrap orders have been canceled and buyers are not expected to push pricing down. Although the Chicago region is slated to have reductions in overall buying plans, the surrounding markets will have normal programs, which should keep prices from slipping.


The finished steel shortage continues to maintain elevated hot-rolled coil (HRC) prices and sources see no current downside in the outlook. Steel pricing should also continue to uphold scrap pricing and prevent declines despite healthy supply flows.


HRC spot prices have continued to gain strength and are now at $1,542-1,609/mt (1,400-1,460/nt) fob mill. HRC prices rose by $43-88/mt against April 21 levels. CRC prices are currently trending at about $130-170/mt higher than HRC prices. 


The potential for additional stimulus monies into the economy, including the infrastructure plan, is anticipated to support strong raw materials and finished steel prices and dampen the possible price erosion from new supplies expected online through the year. 


Rebar spot prices continue at $904-948/mt ($820-860/nt fob mill), but recent price announcements are increasing list prices by $40-50/nt on rebar, beams, and structural steel. With the strong demand, long lead times, and tight supplies, buyers are expected to adopt prices swiftly in early May.

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