Turkey scrap import price near peak but retains support

Expectation is growing that the Turkish scrap import price has temporarily peaked as domestic and export rebar and billet prices have stopped rising, but scrap supply fundamentals are still strong enough to prevent a significant weakening of the market.

Turkish mills have been unable to raise rebar and billet prices at the same rate that scrap prices have risen since 22 February, which has squeezed steelmakers' margins for new scrap purchases.

The Argus daily fob Turkey steel rebar and cfr Turkey steel scrap assessments increased $3.50/t and $18/t respectively since 22 February. Steelmakers found some relief in the Turkish domestic market, where pricing did rise in line with the scrap import price until 5 March, but domestic demand has dropped off during the past week, during which time the scrap price has risen another $7/t.

A lack of scrap offers to Turkey is the main reason the Turkish scrap import price has increased since 22 February. The limited availability of offers was driven by persistently strong domestic demand in scrap exporting countries and the consequent supporting effect on dockside scrap purchasing prices.

Early indications emerged last week that the US and European domestic markets could weaken in April and May but scrap supply is still expected to be limited throughout the rest of March. Some scrap exporting regions are also still experiencing winter conditions which limits collection levels. This is expected to mitigate the extent of any Turkish scrap price fall in the coming days and market participants are now anticipating a more sustained downturn in April.

The current question for Turkish mills is whether they can push the import scrap price down to $320/t cfr Turkey. Longs producers attempted to push the price down to this level today, it was confirmed. They still face offers at $325-330/t cfr Turkey.

Demand from flats producers could determine the size of any price decrease. Two flats producers were heard to be searching for deep-sea material today, which may block any chance for longs producers to push the scrap import price down. One longs producer is concerned that a flats producer which purchased UK HMS 1/2 80:20 at the end of last week at $320/t cfr Izmir is attempting to keep the scrap import price supported in order to maintain its coil sales at current levels.

And volatile rebar demand means at least one Turkish longs producer may need to seek a first half April shipment cargo in order to fill a more prompt delivery period in order books.

There may only be a few days to a week for mills to put downward pressure the scrap import price if there is still first half April shipment to purchase.

Scrap supply fundamentals, flats producers' steady demand and the need for first half April shipment by some longs producers means market participants expect the scrap price to stay supported and range-bound by around $5/t throughout the rest of March, despite the weakening of steel markets.