Baltic scrap export sales to Turkey up on higher supply

Baltic ferrous scrap exporters have increased their share of the Turkish scrap import market in recent months on higher shipment volumes driven by the sourcing of material outside their immediate local regions, and by lower scrap consumption in their own domestic markets.

Argus has tracked 279 deep-sea deals into Turkey since 1 July 2020, of which 73 were of Baltic/Scandinavian origin, a share of 26.2pc. In the first half of 2020, 28 out of 143 deep-sea deals tracked were of this origin, a share of 19.6pc — 6.6 percentage points lower than from July 2020 to today.

Ferrous scrap exports from non-Russian Baltic countries to Turkey increased by 33.9pc on the year to 2.55mn t in 2020, far outpacing the wider 19.2pc rise in overall Turkish scrap imports (see table).

Part of the driver for Turkey's import shift in the second half of last year include a relative lack of export supply from the US east coast in the third and fourth quarters of 2020 as the US domestic steel and scrap markets recovered from the Covid-19 spring wave and associated lockdowns.

But there has been significant change in Baltic and European domestic scrap markets during the past year, which better explains the reason why more exports to Turkey are coming from Baltic ports.

The majority of Baltic export activity comes from the port of Klaipeda, Lithuania, but overall scrap supply is tight in the area and there is significant competition between a number of scrap exporters that use the port as a transshipment hub.

This has pushed most Baltic scrap exporters to seek material from further afield from their local catchment regions and three Baltic scrap exporters have significantly increased their imports from Poland into Klaipeda.

Lithuanian and Polish scrap exports to Turkey rose by 66pc and 46pc in 2020, respectively, Turkish customs data show.

The sourcing of material from Poland has been supported by the weakness of domestic mill consumption in that country. Three major Polish steel mills showed very weak demand throughout 2020 as a result of the pandemic as they lacked support from major EU infrastructure projects, and that naturally led to an increase in supply available for export.

Gdansk is one of the regularly used ports by Baltic scrap exporters. One Baltic exporter is heard to have increased its import shipments from Poland to Klaipeda to 100,000t in 2020 from 60,000t in 2019, and a second Baltic exporter is heard to have increased its Polish scrap imports into Klaipeda to 60,000t last year.

Another reason why Baltic exporters had to find new sources of material from other destinations starting in 2019 was the entrance of a new Baltic exporter in Poland in 2017-18 that increased its sourcing and shipments to Turkey in 2019.

Those pre-existing Baltic exporters began to increase imports from small to medium-sized scrap operations in countries such as Finland and Sweden. There has even been discussion last year of scrap agencies being set up between Scandinavia and Baltic states. Baltic exporters can receive 3,000t cargoes by vessel from Sweden and Finland in the same delivery period in which they can sometimes source 200t from a domestic supplier, although the costs are higher.

The huge local competition and lack of close availability has pushed some Baltic exporters to source material even further afield, taking cheaper material from eastern Germany. This has naturally led to a shift in their quality mixes, which Turkish steelmakers have noticed in the some of the cargoes received in the past six months. The port of Szczecin on the Poland/Germany border has been heard to be used as an outlet for this sourcing.

One Baltic exporter is not having to go as far afield as Germany for tons as it acquired yard space in Klaipeda in April 2020 from another Baltic exporter. This supplier is now increasing its exports to Turkey on the year. It plans to ship 15 deep-sea cargoes to Turkey in 2021, up from 11 in 2020 and eight in 2019.

Two Baltic exporters that sourced scrap from more diverse sources have significantly increased their export sales to Turkish mills since 1 July 2021. The first signs of this were in July when the two exporters combined sold seven cargoes to Turkey in the month.

The two exporters sold five cargoes combined in October, and between the beginning of November and the beginning of December, they sold nine cargoes combined. Previously, the two exporters were heard to sell an average of no more than two deep-sea cargoes each in any given month.

One of those two Baltic exporters has just sold its third cargo in a week to Turkey, and the other exporter has offered a third cargo in the space of a week.

By Alex Reynolds