SUBSCRIBER NOTE: S&P Global Platts merges US scrap prices

S&P global Platts has combined the price assessment for two US-based shredded scrap price series. Platts has changed the methodology of these two shredded price series in order to merge them. Platts has also changed a number of its US-based scrap assessments, effective November 1, 2017.

This follows a period of market feedback, which started with the publication of a subscriber note on July 18, 2017 and a decision note on August 9, 2017.

This subscriber note relates to the following TSI-branded price series: TSI Shredded Scrap 10-day Average USA Domestic Prod Dlvd US Midwest (TS11033) TSI Shredded USA Domestic Prod Dlvd US Midwest Mill Wkly (TS01030)

This subscriber note relates to the following Platts-branded price series: Platts Shredded Scrap Delivered US Midwest (FEMWD00) Platts #1 Busheling Scrap N Amer Dom Prod Dlvd Mill Wkly (SB01001) Platts Heavy Melting Scrap 1/2 N Amer Dom Prod Dlvd Mill Wkly (SB01135) Platts Plate & Structural N Amer Dom Prod Dlvd Mill Wkly (SB01174) Platts Shredded FOB US East Coast (FEECD00) Platts HMS Delivered US East Coast Dockside (FEECH00) Platts Containerized HMS, FAS US West Coast (AAXIV00)

DELIVERED MIDWEST SCRAP: Platts has discontinued the TSI-branded shredded scrap code TS01030, but retained the Platts-branded code FEMWD00. As part of this change, Platts has changed the existing methodology of the following delivered US Midwest mill numbers: FEMWD00; SB01001; SB01135 and SB01174 in order to best reflect the trading patterns in the underlying market.

The US scrap market trades using a "buy-week" period that can take place towards the end of the month of delivery minus one (M-1) or at the start of the delivery month (M). These periods are in any case the times that tend to see the highest degree of trade activity.

As a consequence, Platts will assess the market every day in the last week of M-1 and the first week of M. The M-1 week is defined as the last week that begins (on a Monday) with a date in M-1; the M week is defined as the first week that starts (on a Monday) with a date in M. Prices would then be assessed weekly (on Fridays) in M until the last week begins, when daily publication would resume.

To give an example using August-September, 2017: the last week of M-1 would be August 28-September 1; the first week of M would be September 4-8, while September 15 & 22 would see weekly quotes before September 25-29, when daily quotes would be resumed.

By using this method, Platts will capture the most active periods of trade activity while also valuing the market when additional tonnes are booked, but in smaller volume. These price series will use a volume-weighted average calculation -- as per TSI's current standard -- to determine value on a delivered Midwest steel mill basis. A volume-weighted average approach has proven particularly robust at valuing a market with diverse inland geographic steel mill locations.

COASTAL SCRAP: Platts will assess the coastal scrap price series (FEECD00; FEECH00; AAXIV00) using a market-on-close assessment process. Geographic delivery points are less spread out and these assessments link to export markets, from which netback values can be derived. Platts has changed the incoterm reflected in its East Coast HMS assessment (FEECH00) to Free-on-Board from Delivered Dockside.

For both East Coast scrap assessments -- shred and HMS -- Platts will change the quantity reflected to a range of 10,000 mt-20,000 mt. Currently, the shredded assessment normalizes to quantity of 25,000 mt; the HMS dockside reflects 1,000 lt deliveries.

In addition, Platts has moved the delivery period under assessment to 5-45 days ahead for both the East Coast assessments from 2-6 weeks ahead for shred and 0-30 days for HMS. Platts has discontinued its West Coast HMS assessment (AAXIV00).

DATA PRESENTATION: Data collected from the market will be published as "market heards" and in market commentaries -- in order to make all data used open to market scrutiny. As a result, S&P Global Platts will no longer receive submissions pursuant to the existing TSI Data Provider agreements for companies submitting to TSI's US scrap indices, including for the remaining TSI-branded price code: TS11033.

Platts will publish all price series covered in this subscriber note as a single value. The single values will be rounded to the nearest $0.25/lt. All FOB East Coast values will be assessed in $/mt.

DATA COLLECTION: Platts will collect transactional data (including deals, firm bids, offers and indicative values) until 3:30 pm US Eastern time. The data will be collected by surveying active market participants, while any market participant will also be able to submit data to the TSI price reporting portal. The indices will be published at 4:30 pm US Eastern time.

DATA USAGE: In terms of data inclusion, transactions will be weighted highest, followed by bids and offers in the volume-weighted average calculations. As well as transactions, bids and offers, Platts will consider the use of indicative values collected from active market participants across the supply chain in determining market value in its TSI-branded codes as well, thereby increasing data collection in periods of illiquidity.

INDEX/ASSESSMENT NAME: In light of these changes, Platts will change the name of the price series to start with "Platts TSI" and otherwise clarify their naming conventions, for example: "Platts TSI Shredded Scrap FOB USEC."

FEEDBACK: Please submit any feedback, comments or questions on this subject to pricemethodology@spglobal.com.

For written comments, please provide a clear indication if comments are not intended for publication by Platts for public viewing. Platts will consider all comments received and will make comments not marked as confidential available upon request.