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The weather in Istanbul was warm last week, and more than one delegate at the Bureau of International Recycling (BIR) Convention was a bit hot under the collar.
For many in the ferrous scrap sector, the first of BIR’s two conferences this year offered an opportunity to visit important customers and negotiate new shipments. Merchants from all around the world, but Western Europe and the USA particularly, were watching the Turkish delegates carefully.
So far this year, merchants have done pretty well.
When steel demand collapsed, recyclers were quick to rein in processing and destock. With minimal arisings, prices rose progressively in the first four months of this year as mini-mills were forced to buy new cargoes or stop melting, even though the tonnages were small.
Turkish EAF operators didn’t do much to help the situation. As demand for finished products like rebar and wire rod in some regions some sign of recovering, they ramped up production, some would say excessively and irresponsibly.
“I sold right there”, one delegate proudly told MB on the sidelines of the event, pointing at the peak of $463.06 per tonne MB’s Ferrous Scrap Index recorded for material delivered to Iskenderun on April 9.
This compared with bookings made at $324.91 at the beginning of the year.
But prices rising so high, and quite so quickly, hasn’t done steelmakers any favours.
Even though most mills ramped up production from last year’s dismal levels, demand for the key finished products from Turkey has been sedate, to say the least. And smaller mills which lack the resources of their larger brethren are struggling to sell anything outside the domestic market.
With scrap prices so high, re-rollers have also struggled as local mills kept billet prices high as well — everyone’s margins have been shrinking — and some even look like having to down tools.
Most delegates at the first day, which concentrated on ferrous metals recycling, were hoping the upward trend would continue. Exporters from Iran, Tunisia and other regions all counted amongst those looking to get a share of the EAF market in this region.
Their hopes were dashed.
On Tuesday MB confirmed two Turkish mills had booked mixed shredded and HMS 1&2 (80:20 mix) cargoes at $350 per tonne cfr and then $349. The market kept falling.
With so many suppliers in Istanbul for the conference, more settlements weren’t long to appear, with at least one further booking made at $340 and one rumoured sale at $330 before the event had even finished.
All of sudden, behind the closed doors of mill import offices all over Istanbul, new contracts were being talked about at levels not seen since the beginning of the year.
That the value of landed cargoes here has dropped quite so quickly isn’t a good sign for the market, although lower offers might tempt some buyers back to the market who wouldn’t have made new purchases otherwise.
Indian consumers, for example, which tend to buy domestic sponge iron when ferrous scrap prices are too high, are likely to come back to the market at these levels. And increased buying from Turkish blast furnace operators could also shore up the latest declines.
Demand for finished products is still poor. And, if Turkish mill execs MB spoke to last week are to be believed, it’s set to get much worse soon.
But that doesn’t mean that scrap prices won’t rise again soon, and quickly — the imbalance between demand for finished steel, crude steel production and ferrous scrap collection has disrupted the structure of pricing and played havoc in the industry.
“This is a market that follows,” said a top level manager at one of Turkey’s mini-mills. “People make decisions, and then others do the same — it’s not good for business.”