Iskenderun scrap terminals undamaged: Correction

Corrects third para that says Iskenderun port authority has declared force majeure - Iskenderun port has closed but official force majeure declaration is yet to be confirmed

Turkey's port of Iskenderun is closed and steel mills in the region have halted operations following a deadly earthquake that struck southern Turkey on 6 February, but steelmakers have incurred little damage to their production facilities or port terminals.

Iskenderun port has been closed and there is a large fire burning at the port's container terminal. No vessels carrying bulk scrap cargoes are currently able to dock at Iskenderun to discharge and several have been tracked waiting outside of the port. Resources to tackle the container terminal fire are limited as emergency services are focused on rescue operations in the region. Manpower and port handling equipment such as cranes are being allocated to rescue and recovery efforts, which means that even when ships are able to dock in Iskenderun, they are likely to face delays in discharging.

Three Turkish steel plants residing inland in Osmaniye will have to evaluate over the coming days when trucks will be available to carry material from the port to the steel mill, and whether road access is feasible. Highways in the Hatay region close to Iskenderun have been closed off because of major destruction. The three other major Turkish steel plants in the region are located in close proximity to their terminals, so they do not have to evaluate logistics to such an extent.

Steelmaking operations in the region have halted because of disruption to natural gas supplies and other energy infrastructure, and because mills are focusing on securing the safety of their workforces. It is not clear how long these stoppages will persist.

For deep-sea scrap cargoes sold to Iskenderun that are currently under loading or on route, Turkish mills will again need to evaluate and communicate with suppliers on whether they have the necessary manpower, equipment and inland logistics to accept material on time.

There is strong potential for delays to cargoes that are under loading for February shipment. But because no Turkish steel mill in the region or steel terminal has been severely damaged, scrap shipments are currently not expected to be cancelled.

Argus tracked 10 deep-sea scrap cargo sales to Iskenderun mills for February shipment, totaling an estimated combined tonnage of 327,500t.

Growing clarity on the full extent of the devastation in southern Turkey has altered market expectations on the speed at which Iskenderun mills will return to normal operations. Scrap market participants that yesterday thought a recovery of manpower, equipment and logistics could take place within a week now expect significant disruption for several weeks at least. The destruction caused by the earthquake on inland logistics will dampen steel rebar demand in Iskenderun and the surrounding area for many days.

The local rebar market relies on the availability of trucks and roads, and heavy winter conditions are putting further pressure on the market. This, along with expected delays to scrap shipments, will limit demand for new scrap cargoes from southern Turkey even as conditions on the ground begin to improve.

Iskenderun steel mills have accounted for around 18pc of total scrap imports to Turkey since April last year, a figure that will be lower than expected by some market participants. Total crude steel production in Iskenderun does not fully reflect scrap consumption as one of the region's largest steel mills, Isdemir, is a blast furnace operation while other mills in the area purchase large volumes of steel slab and billet as feedstock.

The rest of the scrap-consuming Turkish steel complex has not been directly physically impacted by the earthquake. Marmara and Izmir mills will most likely limit new business this week in order to gauge how the disruption to Iskenderun will affect the market going forward, but their operations are set to continue as normal.

By Alex Reynolds