Baltic Sea ferrous scrap flows drop in July

Ferrous scrap flows to Russian and European Baltic Sea exporters' terminals and yards have slowed significantly in the past two weeks, slipping by 20-35pc among five exporters in the region.

This has discouraged Baltic exporters from making new offers to the Turkish market during this period. Many exporters were unable to commit to an earliest 15-20 August shipment as they are still prioritising collecting scrap for July sales and cannot be sure that they will be able to secure sufficient volume in time for August sales.

The slowdown in Baltic scrap flows is partly the result of a clear-out of excess supply collected in March-April through Turkish mills' strong buying in May and June.

The replenishment of excess supply has been slowed by the disruption caused by the Covid-19 pandemic to scrap obtained from large industrial accounts. And the impact of cuts in Baltic exporters' workforces in March-April is filtering through to new scrap collection activity in the region.

Five European and Russian Baltic exporters this week said scrap flows have fallen considerably since the end of June because sub-suppliers are now not able to replicate the significant amount of material traded earlier in June for the June and July sales to Turkey. The five exporters calculated that flows are 20-35pc down this month compared with the June average.

Many Baltic exporters sell large quantities of bonus and busheling to Turkey, which they buy from EU steelmakers. The continental European steel sector has been slow to return to pre-pandemic operating rates, limiting the supply of prime grade scrap to exporters over the past two months.

Scrap flow in the Baltic and continental Europe is now also being affected by the start of the summer holiday season, which is likely to limit any supply growth in July and August.

The weaker Baltic scrap flow is not currently being mirrored in other major exporting regions to the same extent.

Continental European exporters surveyed this week said scrap flows were down by only 5-10pc this month, and there is a clear overhang of industrial scrap in the US market as indicated by bids yesterday in the Detroit domestic market at $40/gt for July delivery prime grades.

Slow US demand for July combined with a fall in Turkish domestic rebar demand means that US scrap exporters' appetite to sell to Turkey is likely to rise even as Turkish mills' bids fall closer to $250/t cfr for premium HMS 1/2 80:20.

These two factors are pressuring the Turkish scrap import price, which is only being partially offset by the lower availability from the Baltic region.

By Alex Reynolds