WEEKLY SCRAP WRAP: Global scrap prices weaken on thin trading, Turkey troubles
Global ferrous scrap prices softened during the week ended Friday May 25, with falling Turkish scrap prices and the country’s weaker lira muting trade activity both within the country and internationally.
The fall in the value of the lira reduced the number of cargoes booked this week, leading to weaker offer prices. The markets in the United States and India both stagnated as a result of the Turkish situation, causing buyers to step back and wait until market conditions improved.
Taiwan scrap prices were also affected by the falling Turkish market, with prices dropping in response.
Steel mills in Turkey continued to struggle with the weakness of the lira against the US dollar, caused by the political uncertainty in the Middle Eastern country arising from the calling of early elections.
Turkey’s ruling Justice & Development Party (AKP) and the Nationalist Movement Party (MHP) agreed, in a surprise move, to hold parliamentary and presidential elections on June 24 this year, 17 months before they were required to be held.
This is affecting the local market very badly, while demand for finished steel in the export markets was also sluggish, according to market sources.
The lira was trading at TRY100 to $21.32 on May 25, down from TRY100 to $22.22 at the start of the week, according to exchange rate website Oanda.com.
“Everybody is watching to see where the lira will stop falling. It is getting worse every day,” one source said.
Some Baltic Sea merchants reduced their offers to $345 per tonne, Metal Bulletin was told, although other sources believed that offers were not below $350 per tonne cfr.
“Turkish mills cannot accept those offers under the current economic conditions. Only mills which need scrap urgently would pay $330-335 per tonne cfr for HMS 1&2 (80:20),” a mill source added.
But a steel producer in the Iskenderun region booked a Baltic Sea cargo on May 24, comprising 10,000 tonnes of HMS 1&2 (80:20), 9,500 tonnes of shredded and 5,000 tonnes of plate and structural scrap (P&S) at an average price of $347.50 per tonne cfr.
“Mills are securing short-sea scrap for their urgent requirements. They were buying A3-grade scrap at around $330 per tonne cfr but they have already cut their bids to $325 per tonne due to the lira’s weakness,” one market source said on the same day.
Late on Thursday, however, a steel mill in the Marmara region booked a Baltic Sea cargo, comprising 16,000 tonnes of HMS 1&2 (80:20) at $338 per tonne cfr and 4,000 tonnes of bonus scrap at $348 per tonne.
Around the same time, another steel mill in the Iskenderun region booked a UK cargo, comprising 7,000 tonnes of HMS 1&2 (80:20) at $333 per tonne and 3,000 tonnes of bonus at $343 per tonne cfr.
US bulk ferrous scrap export prices were stagnant, with Turkish mills continuing to bypass the country in favor of more affordable European and Baltic material, and with prices for containerized scrap on both the East and West Coasts of the US starting to crack under the pressure.
No cargoes were confirmed sold from either US coast over the week, although sources said that demand for US bulk scrap was increasing in the secondary markets.
“I am seeing demand out of Mexico and even Brazil,” one trader source said. “In the past two weeks, there has been increased demand for shredded scrap from Turkey and strong demand for full shred cargoes from South America.”
Buying activity was likely to become more robust in the coming weeks with Latin American countries, and emerging Asian markets such as Thailand and Malaysia, “waking up,” a broker source added.
Turkish steelmakers were buying cargoes at a sedate pace, preferring to stay mostly on the market sidelines due to slow rebar export demand, the diminished business activity during the Islamic holy month of Ramadan, and the weakness of the lira.
Sources believed that Turkish mills will have to buy during Ramadan this year because they have been holding back from deep-sea purchases in the hope of lower prices.
“The Turks need cargoes. They have to buy. But the question is whether they will go to Europe or come to the US. I think they will probably head to Europe first because European suppliers are more willing to take lower prices right now,” the broker said.
Even though shredded scrap currently commands a premium in the bulk market due to healthy demand, the same resilience was not reflected in the containerized market on the US East Coast. Market participants indicated that prices for containerized shredded scrap slipped to $335-345 per tonne fas from $350-355 per tonne fas a week ago.
On the US West Coast, the market for containerized HMS 1&2 (80:20) was also facing downward pressure from buyers. Prices drifted on the low end of the range to $320-330 per tonne fas from $325-330 per tonne fas a week ago.
“I think that many West Coast dealers will be out of the market if prices drop by more than $5 [per tonne],” a West Coast broker source said.
American Metal Market’s weekly US East Coast ferrous scrap export indices for HMS and shredded scrap were stable on Wednesday at $327.75 per tonne fob New York and $333.75 per tonne fob New York.
Import prices for containerized HMS-grade material in Taiwan decreased this week, with sentiment in the spot market turning bearish.
Metal Bulletin’s assessment of import prices for US-origin HMS 1&2 (80:20) sold into Taiwan was $340-345 per tonne cfr for the week ended May 25, down by $5 per tonne on the high end from a week earlier.
US scrap was offered at $350 per tonne cfr Taiwan in the earlier part of the week, before dropping to $345 per tonne cfr Taiwan on Friday.
There were deals heard done for such material at $340-345 per tonne cfr Taiwan, down from $340-350 per tonne cfr Taiwan heard last week.
A major buyer purchased 1,000-2,000 tonnes of ferrous scrap at close to $340 per tonne cfr Taiwan, citing sufficient raw material inventory as the principal reason not to buy more.
Bulk Japan-origin HMS 1&2 (50:50) was offered at $355 per tonne cfr Taiwan, down from $355-357 per tonne cfr Taiwan last week, with buyers bidding $348 per tonne cfr Taiwan. Bulk Japan-origin HMS 2 was offered at $343 per tonne cfr Taiwan.
Market sources pointed to the weakening of Turkey’s lira and the lower scrap import prices there as being among the key reasons for the downturn in sentiment in Asia, because sellers would be willing to send more cargoes to Asia due to the more attractive prices there.
“The price may continue go down in the near term because the Turkish economy is not expected to improve any time soon,” a second Taiwanese trader said.
Metal Bulletin’s weekly index for containerized imports of shredded scrap into India was $382.90 per tonne cfr Nhava Sheva on May 25, little changed from $382.31 per tonne cfr Nhava Sheva on May 18.
Market participants estimated the highest achievable offers for shredded material into India to be $385 per tonne during the week, down from $390 per tonne the week before.
One deal for UK-origin material was reportedly made at $385 per tonne cfr Nhava Shava but material was available at prices as low as $375 per tonne on the same delivery terms.
“The market was quiet this week. We will sell our material next week. We’re waiting for the right price,” a trader said.
“There are no buyers in the market. Prices are not viable. We will wait and watch,” a second trader said.
“The market has gone down by about $5 per tonne the past few days. No buyers want to do deals. People want to wait, perhaps for one week. Let’s see what happens,” a buyer said.
“Traders have been actively looking to other markets such as Indonesia and Pakistan. Buyers are going to need to buy at some stage [and] then everybody will come to the table. It’s a strange time of year, it’s difficult to [discern] a direction [in the market],” a seller said.
The problems in Turkey affected the international scrap markets over the week, sources said.
“We expect a price correction in the international market of around $10-15 per tonne. The local market is good, prices are stable, but people are holding back. The Turkish market is also down. People will start buying when prices fall a bit,” a second seller said.
“We are not keen to buy because we want to see what happens in the market. We will be back trading next week. We’re not trading in big quantities until the market situation is clear. The lira went down a lot, so people will not buy for a few weeks,” a third trader said.
“It’s risky. It’s quiet everywhere, not only in India, but also in Pakistan and even in Turkey. Prices will fall a lot if it stays quiet. And the market in the UAE is quiet because there are fewer working hours due to Ramadan - which means less exports,” a third seller said.
Turkish domestic scrap prices increased in line with the rise in finished long steel prices over the week that ended on May 21, sources said on Monday.
Steel producers in Turkey and a major scrapyard increased their buy prices for auto bundle scrap by TRY25-80 ($6-18) per tonne over the preceding seven days.
Metal Bulletin’s weekly price assessment for domestic auto bundle scrap (DKP grade) in Turkey was TRY1,380-1,560 ($294-333) per tonne delivered on May 21, up from the previous week’s TRY1,370-1,530 per tonne.
Paul Lim in Singapore, Cem Turken in Mugla, and Mei Ling Toh in New York contributed to this report.