Posted on 05 Jan 2021
Turkish deepsea import scrap prices are expected to remain at largely elevated levels over the first quarter of 2021, amid firm mill order books and expected increases in US and EU domestic January scrap contracts, sources say.
S&P Global Platts assessed Turkish imports of premium heavy melting scrap 1/2 (80:20) at $482.50/mt CFR on Jan. 4, up $5/mt from Dec. 31, to reach its highest level in almost 10 years. The index was last assessed higher at $490/mt CFR on Jan. 31, 2011.
"Scrap prices should continue upwards but not as sharply as before," a Turkish mill source said, adding that Chinese steel futures "looked positive."
The LME scrap forward curve over January-March contracts is in sharp backwardation, with January contracts assessed by Platts at $478.75/mt on Jan. 4, and March contracts at $442/mt on Jan. 4, suggesting future traders' expect some softening in physical prices in the near-term, but prices are expected to remain sharply above the 2020 average price of $286.75/mt CFR.
The index rose sharply over the course of 2020, up from a four year-low of $207/mt CFR on March 31, when the impact of the first wave of the coronavirus pandemic shook the market and sparked demand concerns.
Bullish sentiment in the Turkish import scrap market strengthened sharply towards the end of 2020, on a mixture of positive vaccine news, the conclusion of the US presidential election and expectations of a continuation of fiscal stimulus into early 2021.
As a result, the Platts index jumped almost $200/mt to $477.50/mt CFR on Dec. 31, up from a recent trough of $282.25/mt CFR on Oct. 10, 2020. Turkish mills were heard to book some scrap cargoes in December 2020 for as far ahead as March shipment in order to guarantee raw materials to cover a strong Q1 finished steel orderbook.
Demand for Turkish hot-rolled coil and wire rod is strong, with orderbooks largely full until end-March shipment, and while rebar demand is less firm, mills are largely covered into the second half of February and early March.
However, demand for export rebar was heard to be limited at elevated prices, with mill offers heard at $650-$660/mt FOB towards the end of 2020.
Market sources expect January domestic scrap settlements in the US and EU to rise substantially on month, which is likely to keep scrap offers into Turkey at elevated levels.
US sources are expecting a monthly increase of at least $50-$60/lt in the US domestic scrap market for January contracts, with some traders indicating expected tradable value for shredded scrap up $60-$80/lt from December pricing for January delivery.
European scrap recyclers cited expected increases of at least Eur50/mt on month in January, given the sharp increase in the benchmark Turkish deepsea import price. Platts' December assessment for Northern European domestic shredded scrap was Eur275/mt delivered, up sharply from Eur242.50/mt delivered for November.
These hikes are leading to sharp increases in HMS collection prices on the US East Coast and in the Benelux region, with scrap exporters citing concerns over margin when collecting material for already booked cargoes into Turkey.
One US trader cited collection prices at $315-$370/lt, depending on tonnage and location on the US East Coast for HMS, while an EU recycler said "exporters, who sold and still need to cover, intend to pay whatever they have to in order to get the tons."
Elsewhere, the Russian is to tax ferrous scrap exports at minimum Euro 45/mt, or 5%, whichever is higher during a period of 180 days, starting Jan. 30, according to a notice published Dec. 30.
The new duty is likely to put further put upside pressure on Turkish import prices, by potentially limiting scrap import sources for Turkish mills, although a Russian mill source said it would "still be attractive to export scrap given the [low] domestic price".
Russia-origin ferrous scrap is a key import source for Turkish mills, which imported 1.88 million mt of ferrous scrap from Russia in 2019 and has imported 2.15 million mt over Jan-Nov 2020, according to the latest data.
In addition, Turkish market sources will keep a close eye on developments in the Chinese import ferrous scrap market, with the first deals done for ferrous scrap imports into China in nearly 20 months on Jan. 1, albeit at small volumes of 2,800 mt and 3,000 mt.
The two trades follow the Dec. 31 announcement by Chinese authorities of five new HS Codes that would apply to imports of ferrous scrap under the "Recycled iron-steel materials" standard.
"Even if China only starts to import 400,000-500,000 mt each month, it will still have a big impact on the market," a Turkish agent source said.
Market sources said current market economics do not make Chinese ferrous scrap imports viable, with current international scrap prices heard to be roughly $50/mt higher than China domestic prices, with the small-volume deals heard to be booked on a trial basis.
Source:Platts
