Turkish steelmakers' feedstock-finished product margins have grown in recent weeks on the back of firming rebar prices and relatively stable scrap purchasing.
While demand in the domestic construction sector has been increasing seasonally, mills have been more measured in their scrap purchasing while also not rushing to lift availability of thinner rebar dimensions that have been in shortage in some areas. So together with ample cargo availability, scrap import prices have remained relatively stable over the past several weeks, while buyers have accepted successive hikes on rebar.
But demand for scrap has been increasing and mills are focusing on completing their books for October shipment. Recent US-origin sales activity saw an uptick in scrap prices, which now sit at $380/t cfr, but that increase has been far outpaced by rises in Turkey's domestic rebar market.
Scrap prices floated around $375/t cfr since the second half of July before this week's $5/t increase. During that time, domestic rebar prices have climbed $30/t to sit above $600/t for the first time since April.
Mills' margins have typically been tight in recent years, but stable feedstock pricing and rises in the rebar market have pushed some Turkish steelmakers' margins to $15-35/t, according to Argus estimates — a multi-year high. The imported scrap-domestic rebar differential required in order to make a profit is typically indicated at about $200/t, although this does vary widely between mills and according to production capacity utilisation, energy prices, domestic scrap prices and availability. Some mills are likely to require significantly more than a $200/t differential, sources say, while the largest mills can comfortably profit with a $190-200/t gap.
Mills have also purchased ample volumes of Asian billet in the past few weeks at relatively competitive prices, which will support export margins. At least 250,000t of billet or possibly above 300,000t was booked from mid-August onwards, the bulk of it Chinese and Indian material priced at $495-505/t cfr. Export prices have now pushed above $590/t fob for rebar meaning mills that bought billet $100/t lower should theoretically have a margin of up to $45/t if they sell sufficient volumes at new price levels.
