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Kallanish Kallanish

Knowledge matters Knowledge matters

November, 17th 2019

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NOV 05
14:20

Costlier scrap, inert sales prices squeeze Turkish mills

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Turkish mills have had to pay more for their scrap purchases, but have failed to reflect the higher scrap costs in their finished product prices, Kallanish observes.

Since the beginning of October scrap prices have increased $36/tonne, while rebar prices increased only $15/t in transactions. Consequently, Turkish mills are observed to have remained squeezed by production costs and steel sales prices, with each increase in scrap prices narrowing their margins.

In the most recent scrap deals, deep-sea scrap prices for HMS I/II 80:20 rose to $259/t cfr Turkey. This represents a $7.5/t and $10/t on-week increase compared to previous US and Baltic deals respectively, while new offers this week have already exceeded $260/t cfr. US and Baltic suppliers’ quotes to the Turkish market this week are heard to be at $261-262/t cfr for HMS 80:20. European suppliers’ quotes for the same grade stand at $255-258/t cfr.

A Turkish mill tells Kallanish: “There are almost no offers from short-sea suppliers. This situation directs us to buy deep-sea material. Consequently, prices keep climbing. I don’t think prices can go above $265/t. Demand for our products is still too low.”

While the shortage in short-sea scrap continues, Turkish mills’ demand for domestic scrap remains strong. Apart from Russian-origin scrap, a limited number of short-sea offers are heard at $250/t cfr Turkey.

Scrap prices, which have recorded sharp increases in the last month, have begun to face resistance in Asian markets. There is still demand for deep-sea scrap in the Turkish market, which will likely result in more bookings this week. It is, however, questionable whether this situation can sustain for much longer given the lack of support from finished steel demand. This, coupled with their squeezed margins, may see Turkish mills soon resisting higher prices.