Posted on 18 Dec 2024
Morning Brief: Turkish ferrous scrap prices hit a two-year low in November 2024 as mills delayed January shipment purchases and awaited clearer direction on price floors. Several market sources suggest that prices may have bottomed out, but with no strong fundamentals to support a rebound.
By November-end, US-origin HMS (80:20) dropped $25/t to $335-340/t CFR Turkiye, from $365-370/t in the first week.
However, this year the maximum level that Turkiye's imported ferrous scrap prices could hit was $425-430/t during January 2024, post-which these remained range-bound for the next two months, followed by a sharp drop amid rising billet import volumes in Q2CY'24 (April-June, 2024).
Factors pressuring down Turkiye's imported scrap prices
Fluctuating lira, dull steel demand keeps offers low:In Q3CY'24 (July-September), imported scrap tags continued to fall, amid a fluctuating Turkish lira (TRY) and bearish rebar demand, to reach $365-375/t. October saw a steady start at $375-380/t levels amid stronger rebar sales in both domestic and export markets. Turkish steel mills enjoyed a healthy spread of $235-240/t.
Similarly, in early November, Turkish scrap quotes held steady as both buyers and sellers adopted a wait-and-see approach. However, as the month progressed, pressure on scrap prices intensified due to weak demand for Turkish finished steel, which narrowed the scrap to rebar spread to $225-230/t.
Cheap billet influx forces mills to cut scrap prices: A surge in cheap billet imports depressed domestic and imported scrap offers. Black Sea billet FOB prices hovered at $450-460/t levels in the last two months (November-December), down by $40/t when compared with November 2022 levels ($485-495/t).
Prices of billets, CFR Iskenderun, hovered at $470-485/t levels in the last two months of the calendar, down by $50-60/t when compared with November 2022 levels ($530-550/t).
Rising Turkish billet imports in CY'24 vs CY'23.
Billet imports were at their highest in the last two years in October at 0.95 mnt, nearly 200% y-o-y growth as compared to 0.32 mnt in October 2023, with Russia, Malaysia, and Indonesia being the top suppliers. Weak buying activity, combined with increased billets supply, intensified the pressure on scrap demand.
Rebar demand in export, domestic markets subdued:Demand for rebar in both export and domestic markets remained dull over November-December. In fact, the major trigger for declining imported scrap prices in Turkiye was the drop in rebar export demand followed by a dull domestic rebar market, which kept the mills scraping the bottom of the barrel while purchasing local scrap.
Prices of rebar, FOB Iskenderun, hovered at $570-585/t levels in the last two months, down $70-90/t when compared with November 2022 levels of $640-670/t.
Mills lowered their imported scrap bids to adjust with rebar price cuts, which fell in the first week of November from $605/t to $560-565/t, a decline of $30-40/t.
A continuous drop in the lira versus the dollar also impacted mills' margins.
Red Sea impact: The disruptions in the Red Sea, which began in December 2023, have significantly impacted global ferrous scrap shipping routes. The increase in attacks on vessels navigating this critical maritime corridor has raised security risks, affecting scrap shipments to key Asian markets like Bangladesh, Vietnam, and India. As a result, vessels originally intended for these markets are being re-routed, and scrap flows are shifting toward nearby regions, particularly Turkiye.
This redirection has added complexity to the market, with Turkish buyers benefiting from the diversion of scrap supplies and ample availability, while Asian buyers face extended transit times and higher costs.
Tutkiye's ferrous scrap import volume in 10MCY'24 stood at 16.5 mnt, a 6% rise as compared to 15.6 mnt in CPLY.
Whereas the second largest ferrous scrap importer globally, India, witnessed a nearly 20% drop in this period to 7 mnt as compared to 8.6 mnt in CPLY.
Near-term outlook
The global ferrous scrap market is bracing for notable shifts as key players adopt a more cautious approach amid rising collection costs and fluctuating demand. In the Baltic region, HMS collection costs are projected to increase from Euro 275/t to Euro 280-285/t delivered to docks due to reduced scrap inflows during the holiday season. This increase reflects tightening supply conditions, compelling recyclers to adjust their pricing strategies accordingly.
Turkiye's rebar market is witnessing a surge in activity, with its export offers rising to $570-580/t FOB, up from $560-565/t earlier this month. The surge is attributed to improved rebar demand and restocking interest among buyers, particularly in anticipation of potential supply constraints in the coming weeks. Traders speculate that rebar demand linked to the Syrian reconstruction effort in the coming year.
There are expectations that US-origin HMS (80:20) will hold firm above $350/t CFR, while EU-origin offers are pegged at $345/t CFR. Buyers, having delayed January bookings, are expected to re-enter the market, with at least a dozen vessel bookings likely in the coming days. This surge in activity is expected to push up prices beyond $350/t CFR, especially as mills face growing pressure to restock amid strengthening export and domestic rebar demand.
The combined impact of rising collection costs, tighter supply, and increased rebar sales is expected to drive global scrap prices higher in the coming weeks. Mills, having postponed purchases for as long as possible, may now be forced to pay a premium to secure material, especially with broader market sentiments pointing to potential price support from China's upcoming policy announcements.
Source:BigMint
