Turkey buys record number of advance scrap cargoes

Turkish steelmakers' November purchases of January-shipment deep-sea ferrous scrap cargoes were the highest number bought for a two-month advance period in the past five years that Argus has collected this data.

Turkish steelmakers purchased at least 20 deep-sea scrap cargoes for January 2021 shipment before the end of November 2020, comprising about 600,000t. In the past two years, no more than 12 cargoes have been purchased by the end of any month for two months in advance, and the average sat at about six cargoes. Only three Turkish mills typically tend to buy two months in advance, yet all mills purchased January-shipment cargoes in November.

The early purchasing was driven by strong pricing and widely extended lead times on sales of long and flat steel products in the fourth quarter that were a response to the massively pent-up global steel demand accrued throughout this year as a consequence of the Covid-19 pandemic.

Turkish mills moved to lock in January-shipment scrap purchases after steel prices rose at a faster rate than scrap import levels in November, allowing steelmakers to increase their margins. The average spread between the Argus daily HMS 1/2 80:20 cfr Turkey and fob rebar prices rose by $3.65/t from October to $158.34/t in November, while the average spread between HMS 1/2 80:20 cfr Turkey and Argus weekly rebar ex-works Turkey domestic price (excluding value-added tax) increased by $11.70/t on the month to $161.55/t. Much higher spreads were achievable depending on when trades were done intra-month.

Turkish mills would usually have sufficient prompt shipment rebar demand to fill within the next six weeks to dissuade them from purchasing scrap for further forward delivery. But the vast demand for Turkish steel in the first half of November was heard to have resulted in mills having no December-January-shipment allocation for any overseas destination at all by the end of that month. Sales of rebar to southeast Asia were closed for as far forward as end-of-February shipment.

Two Turkish mills previously stated that this moment could be considered the most risky in which to purchase scrap for two months in advance, based on concerns about lockdowns over the winter period in scrap-exporting regions. But the strength of demand within domestic markets in exporting regions, particularly the US, was a concern for Turkish mills moving into a December-January period when scrap supply becomes tight seasonally.

Similar to this year, Turkish mills bought cargoes constantly throughout October and November 2019, but at that time, the purchases were far more supply-related than demand-related. Trading in December last year was massively down a month earlier, but this drop-off is not expected to happen again this year. Instead, trading is expected to be steady through to the 16-20 December week because of the commitments required by mills pertaining to their steel sales.

Turkish mills need to purchase more shredded scrap material in the first half of December, having bought only small quantities in the second half of November because of the lack of US offers during this period. Turkey-US trading is expected to begin by the end of this week.

By Alex Reynolds