Turkey ferrous: Price flat amid downside pressure

The Turkish scrap import price was flat today amid indications that deep-sea cargo availability will comfortably match expected demand for May shipment, but suppliers are set to resist any attempt by steelmakers to push the market down sharply.

The Argus daily HMS 1/2 80:20 cfr Turkey steel scrap assessment was flat at $429.60/t today.

Over a month ago, strong margins and long steel stales lead times allowed Turkish mills to move to a scrap purchasing cycle in which they did not have to quickly follow competitors' trades with business of their own.

Ample scrap availability also means Turkish mills can afford to steadily buy rather than rush to go back-to-back against steel sales or enter the market in a group. Strong scrap supply has been apparent almost since the start of the year when prices hit historic levels in US and Europe.

Consequently, mills can now attempt to exert downward pressure on the scrap import price for the remainder of the May shipment trade, which could then be followed by a small price rebound when June trading begins in earnest, similar to the pattern in the April-May shipment trading round.

When May shipment trade became liquid around 29 March, and the remaining April shipment supply was close to being traded, the Turkish scrap import price began to rise. A few May shipment cargoes had already traded before this date but there was still a lot of April shipment still to be dealt when those first May shipment cargoes traded.

A similar pattern may occur towards the end of April when the final portions of May shipment supply are purchased. June shipment will likely trade next week but trading for that shipment period will not become fully liquid until the end of this month.

This potential cycle will again depend on exporters' discipline to hold off from selling cargoes at lower levels. And if this cycle does occur again, there will likely be less sellers at the bottom price of the market than there was when material traded at $415/t cfr Turkey towards the end of March.

The scope of any near-term price decrease will be limited by sales done in the past two weeks that has taken a chunk of availability out of the market. Additional supply could be absorbed by Egypt, where multiple exporters received strong demand today.

Another supporting factor is that scrap exporters' purchasing prices have been rising at a faster rate than sales prices to Turkey. Four continental European exporters paid €325-330/t delivered to dock for HMS 1/2 material this morning. That is an increase of around €17.50/t since Turkish prices have moved up around a net $15/t from 23-25 March to today. Several of those exporters sold cargoes at a premium HMS 1/2 80:20 equivalent price of $415/t cfr Turkey two weeks ago.

Turkish mills are still expected to continue selling rebar, billet and hot-rolled coil in the coming days and they need to cover some of their last week sales with new scrap purchases later this week.

Turkish domestic rebar offers mostly stayed firm this morning and two steelmakers increased them on a USD-basis. One made a large tonnage sale last week. Mills can afford to keep their offer levels flat and comfortably maintain margins based on their export order books.

Chinese domestic rebar prices fell Yn80/t ($12.30/t) in the past three business days, which may have contributed to mills' caution to rush into new scrap trades during this time. Mills have largely held off from deep-sea scrap buying since three business days ago.

In the short-sea Turkish imported scrap market mills were today not willing to bid higher than $410/t cif Marmara for western Black Sea-origin HMS 1/2 80:20.

The Argus daily A3 cif Marmara steel scrap assessment decreased $1.30/t to $412.50/t.