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Correlations between steel scrap prices in the Saudi Arabia domestic market and the Turkey import market have been weak since August 2025, highlighting the need for local pricing tools in the Kingdom, market participants told Fastmarkets on Monday December 8.
It is the largest steel scrap importer market in the world, so trends in Turkey are typically used as a barometer by market participants across the globe – historically, including those in the Kingdom of Saudi Arabia.
But the weakness of the correlation between the global bellwether market and Fastmarkets’ Saudi Arabia domestic steel scrap index is eroding traditional reliance on Turkey in the Saudi Arabian market in favor of the new local benchmark, according to market participants.
Fastmarkets launched the world-first Saudi Arabia domestic steel scrap index in August 2025 amid significant demand from market participants for a representative local price to use as a reference during negotiations and in contracts.
It uses price inputs for HMS 1&2 scrap grades in the delivered Jeddah, Riyadh and Eastern Province markets, which are fed into Fastmarkets’ proprietary tonnage-weighted index model, normalized by material dimensions and quality.
Steel scrap is a key feedstock for mills in Saudi Arabia, alongside direct reduced iron (DRI) and hot briquetted iron (HBI). Although the latter metallics are mostly consumed by the major electric-arc furnaces (EAFs) in the country, all steel mills including smaller induction furnaces (IFs) consume ferrous scrap.
While Turkey import scrap prices have risen over the past four months due to stronger local rebar demand, higher freight costs and tighter supply of material due to Egypt’s recent buying spree, Saudi Arabian prices have trended in the opposite direction.
Saudi Arabian scrap prices dropped sharply in September and October amid weaker local rebar prices and very poor mill margins, but have mostly stabilized since then amid tight supply and a recovery in rebar pricing.
In the first 19 weeks of price assessments, from August 5 until December 2, Fastmarkets’ steel scrap HMS 1&2 index, domestic composite, delivered Saudi Arabia, showed a correlation to the index for steel scrap, HMS 1&2 (80:20 mix), US origin, cfr Turkey, of (73.4)%, denoting a deeply negatively correlated relationship over the period.
In the first 14 weeks of the price, from August 5 until October 28, they also showed an R-squared coefficient of just 20.6%, also denoting a very poor correlation, although this then rose to 53.9% over the first 19 weeks due to a couple of weeks of stability in November.
“Regarding the low correlation between the Saudi [Arabian] and Turkish markets, it’s indeed an interesting development and highlights the significance of local market conditions,” a Saudi Arabian government source said last month.
“The index is very accurate and it gives a [correct] reflection of the local price,” a recycler source in the country said.
Using an international comparison, the correlation of the US-origin Turkish scrap index and the assessment for steel scrap, HMS 1&2 (80:20 mix), import, cfr Nhava Sheva, India, was at a stronger correlation of (44)% over the same 19 weeks.
And finally, to look at a domestic Turkey comparison, the index for steel scrap, HMS 1&2 (80:20 mix), US origin, cfr Turkey, showed a correlation with the price for steel scrap auto bundle scrap domestic, delivered Turkey, of a positive 83%, reinforcing Turkey’s close local-import price relationship.
The low correlation meant that index-linked contracts for steel scrap trading in Saudi Arabia which were using the CFR Turkey price as a baseline during the period will have moved in an almost opposite direction to the reality of the Saudi Arabia domestic market.
While Fastmarkets’ index for steel scrap HMS 1&2 (80:20 mix) US origin, cfr Turkey, was $367 per tonne on December 8, the steel scrap HMS 1&2 index, domestic composite, delivered Saudi Arabia, was 1,316.89 riyals ($351) per tonne delivered on December 2.
That means that the discount for the Saudi Arabia domestic price under the US-origin CFR Turkey price was $16 per tonne on December 8, compared with a premium for the Saudi Arabian price over the CFR Turkey price of $37.77 per tonne on August 5.
“The Saudi Arabian steel scrap market price has now fallen to the right level, and I doubt it will go down further for now,” a Saudi Arabian steelmaker source said last week.
“Realistically, the market should be $40-50 per tonne under the CFR Turkey price,” he said, largely due to the fact that HMS 1&2 materials available in the Saudi Arabian market typically match the lower 60:40 or 70:30 qualities compared with the type of 80:20 imported into Turkey, but he said that tight supply made this unlikely.
Moves toward meeting the goals of the Saudi Vision 2030 project and a growing local steel market meant that companies in the Kingdom would increasingly prefer to use local price indices rather than relying on international comparisons, a second Saudi Arabian steel market source said last month.
Steel scrap supply in the country is becoming ever-more crucial given its rising steelmaking capacity and growing demand for steel products from infrastructure projects, according to market sources.
Due to low availability of material and rising demand, Saudi Arabia’s government is stepping in to create an entity for the importing of material from overseas markets, starting next year.
Steelmakers, from smaller induction furnaces (IFs) to larger electric-arc furnaces (EAFs) have been busy submitting their scrap requirements for 2026 to the government, Fastmarkets understands, with one large mill heard to be requesting 200,000 tonnes of scrap for 2026.
Saudi Arabian mills produced 8.87 million tonnes of steel in January-October 2025, up by 12.9% year on year, according to World Steel Association data compiled by the Arab Iron and Steel Union.
The rise in 2025 was driven by expanded steelmaking capacity from IF-based companies such as Al Qaryan and Watania, together with the restart of melting operations at EAF-based mill SOLB Steel in May and stronger output from some major producers.
Saudi Arabian non-oil private sector businesses experienced another strong improvement in operating conditions in November 2025, with overall activity increasing at the sharpest pace in 10 months, driven by higher sales, rapid hiring and increased purchases, according to the Riyad Bank’s purchasing manager’s index (PMI).