Turkish steel mills are retargeting average scrap-rebar margins of $240/t as strong scrap availability and robust rebar demand have again coincided to help to widen the spread between prices of their main raw material input and their finished products.
High scrap availability has been a theme throughout 2021, since prices hit record levels in US and European domestic markets in January. These markets were flooded in the second week of January when US/European domestic mill negotiations settled and premium HMS 1/2 80:20 prices hit what were then records of around $480/t cfr Turkey.
Since January, Turkish steelmakers have increased their scrap-rebar margins straight after the settlement of US and European domestic scrap markets, in the second week of each month.
Turkish mills' scrap-export rebar margins stood at around $160/t before the US January buy week and moved to $170/t after that.
Margins increased to $180/t in the second week of February. And in the second week of March, they climbed to $200/t before rising to $210-215/t in the second week of April. In the second week of May, they moved to $240-250/t.
Government intervention in China and Turkey surrounding the escalation of construction steel prices threatened to dent those margins in late May and early June, respectively.
The Chinese government's intervention resulted in domestic steel prices falling considerably in late May, and despite the wide spreads between Chinese and global rebar prices, global demand turned weak and Turkish export rebar prices came under considerable downward pressure at the start of June, which started to eat into scrap-rebar margins. Some Turkish mills started offering at $725-730/t fob when mills bought HMS 1/2 80:20 at above $500/t cfr Turkey, significantly down from $240-250/t scrap-export rebar spreads in late May.
The Turkish government put pressure on regional steelmakers to drop construction prices at the start of June. Mills' sold at an average of $690/t ex-works on 4 June, when they were buying scrap at just above $500/t cfr. That reflected scrap-domestic rebar spreads of lower than $200/t, very different from the $220-230/t spreads they had achieved in May.
But the evident strength of supply and demand fundamentals for rebar have been displayed clearly in China and Turkey over the past 10 days, with rebar prices rising significantly — and soon after those government interventions.
The volumes sold for export and domestically at lower prices at the start of June were also very small, so mills did not have to deal with lower scrap-rebar margins in any significant way.
In April and now in June, Turkey has seen many North American suppliers sell off material soon after the domestic buying period. A Canadian supplier sold four cargoes to Turkey on 6-9 April, and another four on 9-10 June — both following US monthly scrap settlements.
A total of eight deep-sea cargoes have been heard sold from North America to Turkey since 9 June, around 300,000t overall.
The Canadian supplier's move last week to sell a cargo at the equivalent of $8/t lower than a sale the previous day has brought US and Baltic sellers to the market and edged scrap prices down to around $500/t cfr Turkey. Mills may look to nudge scrap prices down slightly for July shipment based on weak demand for the period. This comes at a time when mills are targeting rebar sales at around $735/t fob, as shown by a sale heard to the US at around this level on 11 June, which would produce spreads of about $235/t.
