WEEKLY SCRAP WRAP: Weak Turkish demand pushes down global prices
The scrap prices in the major markets, other than the United States, have softened in line with weak demand from Turkish steel producers during the working week from Monday January 15 to Friday January 19.
However, the US market was also expected to follow the trend, with Baltic Sea and European suppliers having already agreed to sell material to Turkey at lower prices at the end of the week.
Turkish steel mills remained quiet from Monday to Thursday, which made them able to push down prices when they returned to the deep-sea market for three cargoes on Friday.
A steel mill in the Marmara region booked a European cargo, comprising 15,000 tonnes of HMS 1&2 (75:25), 15,000 tonnes of a mixture of HMS 1 and plate and structural scrap (P&S), and 5,000 tonnes of new cuttings at an average price of $359 per tonne cfr.
Another steel mill in Northern Turkey booked a second European cargo from the same supplier, comprising 15,000 tonnes of HMS 1&2 (75:25), 11,000 tonnes of a mixture of HMS 1 and P&S, 4,000 tonnes of new cuttings and 6,000 tonnes of shredded at an average price of $358 per tonne cfr.
A steel mill in the Iskenderun region booked a Baltic Sea cargo, comprising 21,500 tonnes of HMS 1&2 (80:20) at $359.50 per tonne, 15,000 tonnes of shredded at $364.50 per tonne and 1,500 tonnes of bonus at $369.50 per tonne cfr.
These cargoes resulted a sharp decrease in the daily scrap indices on Friday.
Turkish steel producers were expecting to be back for more February cargoes, but they were struggling with softening rebar export values and weak demand in the country’s major export markets.
Suppliers in the US had been offering HMS 1&2 (80:20) at around $380 per tonne cfr, amid heavy winter conditions in the country.
Meanwhile, the high costs for graphite electrodes remained a problem for steel mills in Turkey. One source in the country said that the electrode problem is reducing the country’s steel production and must have an effect on high-end scrap prices soon.
Mixed signals have emerged in the ferrous scrap export market in the US, with containerized scrap prices showing early signs of distress while export-yard buying prices rose further due to the absence of bulk sales to Turkey.
No US cargo sales from the US East or West Coast have been confirmed so far this year.
Turkish steelmakers appeared to be temporarily maintaining their distance from the deep-sea market due to their reluctance to accept scrap prices in excess of $380 per tonne cfr. Some sources believed that there was no further upside for bulk prices at the moment.
A major US supplier was rumored to have put out a lower-priced offer last week, floating a Gulf Coast cargo to Turkey at $375 per tonne cfr for HMS 1&2 (80:20), while other US exporters were still keeping their offers above $380 per tonne cfr.
“I think it is just a matter of time before Turkey comes back and takes a big position in the markets,” a broker source said. “But there is a chance that some exporters will have to lower their prices in the meantime, while looking for sales into alternative export markets.” He was speaking before the Turkish mills restarted their deep-sea purchases at the end of the week.
Meanwhile, the containerized shredded scrap market on the US East Coast started to slip after holding steady last week. Market participants indicated that prices had fallen to $345-355 per tonne fas this week, from $350-360 per tonne a week ago.
“I think the dip in the East Coast container shred price is a temporary reset. The market is just adjusting to Turkey’s absence,” the broker source said, noting that containerized shredded prices were unlikely to fall dramatically in the near term.
The market for containerized HMS 1&2 (80:20) on the US West Coast was also losing steam, dipping to $330-335 per tonne fas from $335-340 per tonne fas a week ago. Demand was starting to soften, however, because the Lunar New Year on February 16 is drawing closer and mills in the region have scaled back their scrap purchases.
West Coast exporters did not succeed in pushing prices any higher for cargoes offered into Asian markets. One US-origin cargo on offer at $400 per tonne cfr failed to attract buyers’ attention, according to an Asian mill source.
“The market seems to have reached its peak for now,” this source said, adding that bulk export prices will soon face a downward correction. “We are taking a wait-and-see position. It is hard to come up with a [bid] price at the moment.”
Import prices for containerized heavy melting scrap (HMS) in Taiwan showed some signs of softening this week on increased supply.
Sellers continued to offer cargoes at $360 per tonne cfr this week, without letting offer prices slip due to continued harsh weather conditions in the US.
“Judging from the number of offers I’m getting, it seems like the number of cargoes in the market has increased,” a Taiwanese buyer source said.
A major scrap consumer purchased 8,000 tonnes of imported scrap at close to $348 per tonne cfr Taiwan, down by $2 per tonne from last week, a source at the company said.
There were also other price negotiations taking place in the spot market at $350-360 per tonne cfr Taiwan, market sources said.
Sentiment in the global market was mixed this week, with sellers in the US maintaining that scrap supply will remain tight because cold weather and road blockages have disrupted the supply chain, while participants in Taiwan were less optimistic.
“Most US suppliers and dealers remain bullish and expect that prices may take another rise in the near term,” a seller said.
Taiwanese sources felt less positive about the direction of scrap prices, however.
“The market has turned because a major buyer was able to secure cargoes for less than $350 per tonne. Furthermore, some market participants are in wait-and-see positions due to the upcoming Lunar New Year holiday,” a Taiwanese trader said.
Prices for containerized imports of ferrous scrap into India fell this week, with negative sentiment and a drop in demand weakening the market.
Indian import scrap markets achieved their highest prices for more than three years a fortnight ago, but the market undid those gains after a sharp decline in buying activity in Pakistan.
Metal Bulletin’s index for Indian import shredded scrap dropped to $371.63 per tonne cfr Nhava Sheva on January 19, down by $8.82 per tonne week-on-week from $380.45 per tonne cfr.
“As is often the case around the middle of the month, buyers have pushed back, trying to halt and even reverse the upward trend [in prices],” one seller said.
One trader suggested that a recent drop in Indian finished steel prices has led to lower buying requirements for imported ferrous scrap.
“Local consumers are using up local scrap. They just don’t need imported material,” he said. “Once the upward momentum is broken in the finished steel markets, people don’t buy any more [imported scrap].”
Meanwhile, another trader said on Thursday that a lack of Indian buying activity was down to worries about prices in the bellwether Turkish import market. “The prediction that global scrap prices might turn downward now may be the reason for the [market weakness],” this trader said.
But the seller thought that import prices for containerized scrap to Pakistan and India would pick up again before long.
“Most mills are still running lower-than-average stock levels due to a head-in-the-sand approach to current prices,” he said.
“This pent-up demand will burst onto the scene rather suddenly,” he said, adding that it would probably result in prices moving up again before long, due to low supplies in the US and well-booked yards in Europe.
Turkish domestic scrap prices continued to rise at the beginning of the week, in line with rising imported scrap values in the previous week.
Lee Allen in London, Mei Ling Toh in New York and Paul Lim in Singapore contributed to this report.