Corrects price for US east shred in paragraph 8.
A US exporter in the Pacific Northwest sold a bulk ferrous scrap cargo to a Turkish steelmaker this week, highlighting tight liquidity on the west coast and a fresh arbitrage opportunity for shippers.
The 50,000 metric tonne (t) mixed-composition cargo included HMS 1/2 90:10 and shred for December shipment at an undisclosed price. Market participants said the HMS portion of the cargo was around $350/t and shred $370/t. Argus was not able to confirm the cargo price or the freight rate for this uncommon voyage from Vancouver, Washington, to Turkey.
The deal coincides with limited sale opportunities on the west coast because of a reduced demand from Asian buyers and a recent rebound in the Turkish ferrous scrap market.
West coast bulk scrap export volumes for October fell to the lowest level since at least 2016, according to Argus estimates of VesselFinder tracking data. Argus only recorded one 36,000t shipment off the west coast for the month and three cargoes in September which totaled 90,000t, compared with 12 cargoes totaling 384,000t during the same period last year.
Prolonged monsoon rains in Bangladesh and India through mid-October stalled a seasonal rebound in construction activity and demand for scrap-intensive long steel products.
Bangladeshi buyers also face growing challenges financing cargoes because of a liquidity crunch in lending ahead of national elections to replace the existing interim government. Indian mills have been absent from the deep-sea market as buyers increase consumption of cheaper domestically sourced iron metallic units.
By contrast, the Turkish ferrous scrap market is rebounding on stronger rebar demand and insufficient scrap supply.
At the root of the arbitrage is the cost advantage of shipping a larger vessel combined with the higher value placed on shred in Turkey compared to south Asia. Turkish steelmakers have consistently paid a $20/t premium for shred to HMS 1/2 80:20, versus a $5/t premium in Bangladesh. A Turkish mill paid $375.50/t cfr for US east shred this week compared to recent deals to Bangladesh slightly below $360/t cfr.
A US west coast exporter last sold a cargo to Turkey in 2021, which shipped from Los Angeles and weighed 47,055t, according to US customs data. Of the seven bulk cargoes sold to Turkey from the west coast over the last 10 years, five exceeded 42,000t, reflecting freight cost advantages for larger vessels. West coast shippers usually sell cargoes weighing around 32,000t.
Structural shifts in Asian bulk scrap demand over the last decade and a surge in Chinese steel exports has exposed US west coast exporters to increased reliance on Bangladesh. While sales to Mediterranean remain uncommon, diverging pricing and demand trends between Asia and Turkey could open up a new outlet for west coast exporters.
