USEC ferrous scrap exporters tap alternative outlets

Renewed ferrous scrap demand throughout Latin America, North Africa and Europe has allowed US east coast bulk exporters to shift volumes away from Turkey toward higher-priced alternative markets.

At least seven ferrous scrap bulk vessels to non-Turkish destinations have been heard sold off the US east coast in the last two weeks with more than half the cargoes for January shipment and the remaining vessels set for December shipment.

Destinations include Brazil, Mexico, Peru, Egypt, Greece and potentially Ecuador, according to multiple market participants. Buyers in these regions have simultaneously entered the market over the last two weeks and paid premium prices compared to Turkish mills.

Exporters and mills in these markets have kept specific price levels for sales close to the vest, unlike in the Turkish market in which deals are widely advertised.

The rash of sales to higher-priced alternative markets explains the lack of sales to Turkey, the main outlet for US scrap exports, in recent weeks, even as prices there have climbed. There have been no US bulk sales heard to Turkey since 11 November.

The return of alternative buyers has been a function of broader trends in steel demand throughout these regions.

Steel production in Latin America has begun to recover from lows brought on by Covid-19 and the related economic slump in the second and third quarters of this year.

Latin American scrap imports decreased due to Covid-19 earlier this year which created shortages of material. Steelmakers have resumed higher operating rates and returned to the international bulk scrap market.

US sales pull tonnage from Turkey

The shift in sales volumes has allowed US exporters to pressure Turkish mills into hiking bids to compete while also keeping scrap supply tight on the coast through sales to other destinations.

The sales indicate that US east coast exporters have not been waiting and accumulating scrap solely in anticipation of Turkish prices hitting targeted levels.

Turkish steelmakers have gradually increased HMS 1/2 80:20 import prices over the last few weeks, despite attempts to try and stabilize prices this week. At least two February shipment cargoes were booked today from the Baltic and continental Europe, bringing the Argus daily HMS 1/2 80:20 cfr Turkey steel scrap assessment to $361/t today, up by $68/t over the last month.

Turkish mills have reported at least four cargoes for January shipment are available from the US so far this month.

But those cargoes will likely be higher priced following the flurry of US sales elsewhere. US east coast exporters have held offers to Turkey firm, with at least one targeting prices above $370/t cfr Turkey for HMS 1/2 80:20.

One-time blip or sustained strength?

Market participants now are questioning whether the resurgence of demand from alternative outlets to Turkey is a one-time occurrence or if it will sustain into January.

US east coast shipments to markets other than Turkey have been robust over the last month, according Argus analysis of bulk vessel tracking data based on port and dock locations, vessel type, size and destinations.

Since October, Argus has observed the following likely scrap vessel departures to these countries totaling an estimated 350,000 t:

• The Bulk Newport from Camden, New Jersey, on 9 October for Greece
• The UBC Santos from Boston on 17 October for Mexico
• The Adriatic Pearl from New Haven, Connecticut, on 18 October for Mexico
• The La Sauternais from Camden, New Jersey, on 22 October for Peru
• The Shelter Island from Newark, New Jersey, on 24 October for Egypt
• The Gold Dust from Newark on 27 October for Greece
• The Western Lima from Newark on 1 November for Mexico
• The Cielo Di Palermo from Newark on 15 November for Peru
• The Spring Sunshine from Camden on 25 November for Egypt

For the month November, Argus observed at least seven vessel departures to Turkey and at least four in October.

The US has not exported any scrap to Ecuador in 2020, while shipments to Brazil have been more sporadic with one bulk shipment in February 2020 from Philadelphia after no bulk sales in 2019.

Demand from Peru appears to have returned to pre-Covid-19 levels, according to US census data and Argus observations of bulk vessel departures. Prior to the pandemic the US shipped an average of one cargo to Peru each month.

Shipments to Peru halted from May through July but returned in August with Argus observations of departures signaling that demand from the country has been firm through October and November.

By Brad MacAulay