UK ferrous scrap exports to Turkey tumble

UK ferrous scrap exports to Turkey fell year on year for four consecutive months between April and July as UK suppliers diversified sales to alternative markets.

Strong demand from Turkey was the main driver for a sustained rise in UK ferrous scrap exports throughout 2017 and the first quarter of 2018. The country accounted for 35.42pc of UK scrap exports in 2017, rising to 42.15pc in the first quarter of this year, during which UK suppliers shipped 843,000t of scrap to Turkey, UK trade data show.

The Turkish appetite for scrap during this period lifted the entire market, but UK exporters, which were able to collect material at lower relative prices to suppliers from competing exporting regions, were the most enthusiastic sellers to the country.

But the trend reversed sharply from April 2018, with UK exports to Turkey falling for four consecutive months. The UK exported 639,000t to Turkey in the second quarter — a 21pc fall year on year.

The Turkish share of UK exports in the second quarter dropped to 27.65pc, down from 35.86pc the previous year. This was Turkey's lowest share of UK scrap exports since the first quarter of 2015.

The UK exported 826,000t of ferrous scrap in July, a 5.13pc increase from the same month last year.

Exports to Turkey fell by 6.31pc year on year to 254,000t in July and accounted for 30.75pc of total UK scrap exports for the month, down from 34.5pc in 2017.

The decline in UK scrap exports to Turkey over the past four months was partially caused by the acceleration of the Turkish lira crisis. This has cut Turkish domestic rebar and imported scrap demand and made the country a less attractive destination to sell scrap cargoes.

UK exporters are also likely to have become wary that they had become over-exposed to Turkey and that the level of reliance placed on one market throughout 2017 and early 2018 was not a valid long-term strategy given the current volatility in international trading patterns. Suppliers have consequently sought to boost sales to alternative markets from the second quarter of this year.

Consequently, total UK ferrous scrap exports were flat on the year in January-July at 5.13mn t, despite the decrease in sales to Turkey.

Pakistan, Egypt and Bangladesh were three major growth markets for UK exporters in 2017 and have continued to strengthen this year, with Pakistan and Egypt rising to become the UK's second and third largest export markets, respectively.

The UK exported 642,000t to Pakistan in January-July, a 7.03pc increase year on year. The increase was sharper during the second quarter, when exports rose by 23pc year on year to 312,000t. July exports were virtually flat year on year at 94,000t, but the curtailment in demand growth was influenced by political volatility ahead of the Pakistani general election on 25 July.

Pakistan is now the UK's largest south Asian market for scrap exports, filling a gap left by a decline of sales to India throughout 2017 and the first half of this year. The weakening of India was caused by financial reforms in 2016 and 2017 that reduced Indian buyers' ability to finance import purchases and lowered exporters' appetite to sell to the country.

Bangladesh has benefited from the same dynamics, and UK scrap suppliers have diverted large volumes into this market. Scrap exports to Bangladesh surged by 145pc year on year in January-July to 242,000t. Of this total, 208,000t was exported in the April-July period — a 423pc increase on the year.

While Pakistan and Bangladesh primarily consume containerised scrap from the UK, strong pricing and demand in these markets has also increasingly attracted bulk export sales.

Scrap exports to India have continued to fall this year after halving in 2017, but the decline has slowed. The UK shipped 316,00t to India in January-July, a 17pc decrease year on year. UK suppliers reported a resurgence of demand from India throughout August and early September, which could herald a wider recovery in the Indian market over the rest of 2018.

Egypt emerged as the primary bulk market alternative to Turkey for UK exporters last year and has continued to grow in 2018. Total January-July ferrous scrap exports increased by 18pc year on year to 515,000t.

Again, this growth was supercharged in the second quarter, during which UK exporters shipped 296,000t of ferrous scrap to Egypt, a 101pc rise on the same period in 2017.

Exports to Spain, which was the UK's second-largest overseas market in 2017, fell over the first seven months of this year, dropping by 17pc to 468,000t. Spanish steelmakers' bids have frequently not been sufficiently attractive for UK short-sea suppliers to sell throughout the last seven months and these smaller companies have often turned to buyers in the containerised market or in continental Europe as a more attractive alternative.

This is reflected in a significant jump in sales to historically small overseas export markets. In Asia, UK scrap exports to Indonesia jumped 126pc in January-July to 103,000t, while sales to South Korea grew to 55,000t from 3,184t a year earlier. Exports to Vietnam rose by 236pc to 52,000t.

UK short-sea sales of cargoes to the Amsterdam Rotterdam Antwerp region have also increased sharply this year. Exports to Belgium and the Netherlands grew by 146pc and 73pc, respectively, to 94,000t and 62,000t in January-July, as European scrap suppliers sought to use UK material to bolster their own export and domestic capacity.

Exports to the US, another traditionally strong market for UK scrap exporters, fell by 48pc year on year to 209,000t in January-July. But within that total is 56,000t exported in July alone, which was a 103pc increase on July 2017 and potentially indicative that the boom of the US steel industry this year could see it regain prominence as a major scrap export market for the UK.