A drop in short-sea scrap availability from Libya and Ukraine is likely to increase Turkish steelmakers' deep-sea scrap import requirement for the October shipment period.
Turkish mills stated in the first half of July that they had started to receive a high number of short-sea offers from Libya and Ukraine, which reduced their deep-sea cargo needs for the remainder of July, during which the August shipment round of trading took place.
Customs data released in the past week show that Turkey imported 81,934t of Libyan scrap through July, the highest monthly figure from the country since January 2020. Turkey also imported 98,435t of Ukrainian scrap in July, the highest figure from the Black Sea exporter in 2020 or 2021 and a strong number given that Ukrainian ferrous scrap remains subject to a €58/t export duty.
But export flow from both of these countries could be restricted in the near term. Libya's Ministry of Economy and Trade was heard to ban the export of ferrous scrap on 16 August. Turkish market participants said this week that there was uncertainty over how comprehensive the ban is and said it may not extend across all Libyan ports, but that availability out of the country's main scrap export hub Misrata to Iskenderun mills is likely to be disrupted
In Ukraine, high export volumes in July created a shortage of supply for domestic steelmakers and culminated in domestic prices rising significantly above Turkish import levels through August. This will divert flow from Black Sea docks back into the Ukrainian domestic market, which will particularly impact scrap importers in northern Turkey.
Ukraine's government is also looking into a full ban on scrap exports. The country's use of duties to drive exports down to extremely low levels prior to this summer indicates that a full ban is potentially a more realistic prospect than in some other geographies where a similar idea has been proposed, such as Russia.
The total volume of 180,369t which Turkish mills imported from Ukraine and Libya in July equates to around six deep-sea cargoes.
The effects of the reduced short-sea scrap supply may have already been seen in the second half of August. Turkish mills are recorded to have purchased 27 deep-sea cargoes in August compared to the 23 deep-sea cargoes recorded purchased in July, Argus data show.
A total of 33 deep-sea cargoes are recorded purchased for September shipment, and more are expected. Only 29 deep-sea cargoes were recorded purchases for August shipment in total.
Other short-sea exporters to Turkey such as Bulgaria and Romania have been impacted by elevated freight rates, which combined with the lower Libyan and Ukrainian availability has increased resistance to sell to Turkey at lower prices across the entire western Black Sea region since mid-August.
Argus' daily HMS 1/2 80:20 cif Turkey (short-sea) steel scrap assessment increased by $1.30/t to $421.30/t cif yesterday on the back of this supplier resistance.
The culmination of lower short-sea supply from many exporting regions to Turkey is expected to see Turkish mills increase their October shipment deep-sea purchases back to similar levels to July shipment. Deep-sea cargoes for July shipment were booked in May and June, before Turkey was shown the high levels of Ukrainian and Libyan supply at the start of July. Turkish mills were recorded to purchase 42 deep-sea cargoes for July shipment, according to Argus data, with the total estimated booked close to 50 cargoes.
