Falling Turkish rebar demand weighs on scrap prices

Large Turkish steelmakers have dropped target prices for premium HMS 1/2 80:20 imported scrap below $255/t cfr Turkey, driven by a dollar-equivalent decrease of $12.10/t in Turkish domestic rebar prices over the past two weeks.

Turkish domestic stockist demand was strong for the construction season up until 10 June, at which time Marmara, Izmir and Iskenderun stockists' bids were confirmed in a $427.40-433.80/t ex-works excluding value-added tax (VAT) range, or an average of $430.60/t ex-works excluding VAT, based on a Turkish Central Bank exchange rate of TL6.78:$1.

Five deep-sea scrap cargoes were recorded sold to Turkish mills on 10 June at an average cfr Turkey premium HMS 1/2 80:20 price of $266.40/t.

Four more deep-sea cargoes changed hands from 12-15 June, but a subsequent fall in demand resulted in scrap prices dropping from the $265-267/t cfr Turkey range for premium HMS 1/2 80:20 in the week of 8-12 June.

The Argus daily HMS 1/2 80:20 cfr Turkey steel scrap assessment fell by $1.50/t to $253.50/t cfr today, based on the assessment of a continental European cargo sold to a Marmara mill. The assessment previously weakened by $14/t from $269/t cfr from 15-24 June.

Weaker Turkish domestic rebar demand and mills' conclusion of July deep-sea shipment requirement purchases — pending potentially one or two more cargoes — resulted in mills holding back from scrap negotiations for 10 days prior to the deal concluded today.

No overseas rebar demand for September shipment is apparent yet, and mills have been unable to attract interest at a $415/t fob Turkey price.

Domestic rebar bids have declined gradually throughout the past two weeks, culminating in lower bids today at an average equivalent of $418.50/t ex-works excluding VAT, based on lira-denominated bids in Marmara, Izmir and Iskenderun collected by Argus and today's Turkish Central Bank exchange rate of TL6.8558:$1.

Marmara, Izmir and Iskenderun bids were confirmed to average TL3,390/t, TL3,350/t and TL3,415/t ex-works including VAT.

If mills aim to maintain their scrap-domestic rebar margins for the August deep-sea scrap shipment trade, this suggests that the maximum current price they will bid for HMS 1/2 80:20 is now $254.30/t cfr, based on the $12.10/t drop in domestic rebar bids and the average premium HMS 1/2 80:20 purchasing price of $266.40/t cfr on the last liquid day of scrap trading on which domestic rebar demand ended.

But the renewed fall in domestic rebar bids today indicates the possibility of a further rebar price decrease, which means that mills may look to push scrap purchase prices more aggressively towards $250/t cfr. Bid indications from the larger Turkish mills were given at $250/t cfr for premium HMS 1/2 80:20 on 18-19 June, with no additional movement heard until today's deal.

Several Romanian short-sea cargoes were confirmed sold in a $241-244/t cif Turkey range today and yesterday, and other sellers today confirmed offers at $245/t cif Turkey, indicating that the tradeable level for deep-sea premium HMS 1/2 80:20 remains just above $250/t cfr.

By Alex Reynolds