Turkish ferrous scrap demand expected to remain weak

Turkish demand for imported ferrous scrap is expected to decrease in the coming months because of a slowdown in the country's domestic rebar market, steel trade association Irepas' raw materials suppliers committee chairman Jens Bjorkman said this week.

A slowdown in the Turkish domestic steel market has led to a drop in Turkish demand for ferrous scrap since September 2018. Imported ferrous scrap volumes fell to 1.38mn t per month in September 2018-February 2019 from 1.82mn t in January-August 2018, Turkish customs data shows.

And Turkish average monthly imported scrap volumes in March-April are expected to remain below 1.5mn t/month, based on Argus deal records for the period. Purchasing for May shipment is not fully completed yet but market participants expect volumes to fall below March-April levels.

Turkish mills have limited options outside of reducing capacity utilisation rates, as alternative export markets such as Africa are not sufficient to replace the reduced sales into the US and the EU caused by the US section 232 import tariff and EU safeguard measures, Irepas traders committee chairman F.D. Baysal said.

Yemen and Israel have become Turkey's main export markets since the introduction of various protectionist measures by multiple countries over the past year, Irepas chairman Murat Cebecioglu said.

Any fall in the seaborne ferrous scrap price caused by the lower demand could be limited by supporting factors on the supply side.

Bjorkman, who is also head of ferrous trade at Swedish metals recycler Stena International, said a slowdown in Europe's automotive sector is reducing availability of prime scrap grades, while high summer temperatures could once again cause Rhine water rates to drop and limit the movement of scrap across the continent.

Multiple northwest European market participants previously suggested that inflow of new scrap was at least 10-20 pc lower year on year in January-March.

Scrap deliveries by inland waterways in northwest Europe were disrupted several times in the past year, particularly during the summer months because of low water levels. Transportation availability and cost are expected to remain among the main challenges for northwest European scrap suppliers.

Bjorkman added that robust demand from US steelmakers will continue to allow some US exporters to allocate material that would typically be sold to Turkey back to their own domestic market, further limiting seaborne scrap availability and lending support to prices.

Increasing steel production in new global markets — particularly from north Africa, south America and southeast Asia — will also be able to absorb some of the scrap that would typically be shipped to Turkey. But the increase in demand from these regions is still unlikely to be sufficient to fully absorb the fall in Turkish demand this year, multiple sources said during the Irepas conference on 7-9 April.