The differential between iron ore prices in China and scrap levels in Turkey remained steady last week despite the slight reduction of scrap levels since the March peak.

Currently, the spread is some $290/tonne. Scrap is holding at above $350/t cfr Turkey and iron ore continues to fluctuate between $62/t and $65/t cfr Qingdao, as it has done for the last month or so.

At the beginning of July 2017, the differential between the two indexes stood at slightly more than $230/t while back in July 2016 it was close to $160/t. The spike in the level is confirmed by an analysis of how the iron ore price and the scrap index have moved during the last twelve months. Scrap increased its value by almost 20% year-on-year while iron ore only has recovered by only 2-3% y-o-y (see chart).

Earlier this year, when the differential between the two main raw material prices globally surpassed $300/t, scrap corrected swiftly. The current spread has been relatively stable since April this year, an indication perhaps that it has reached a balanced level.