Turkey ferrous: Price flat, mills look to widen margins

The Turkish scrap import price was flat on Thursday amid no trading activity as steelmakers looked to expand their scrap-rebar margins via rising domestic rebar demand and expectation for scrap availability to remain strong for September shipment trade.

The Argus daily HMS 1/2 80:20 cfr Turkey steel scrap assessment was flat at $464.80/t.

The majority of US exporters are now out of the market but Baltic exporters have moved August shipment allocation to September. Most Turkish scrap market participants believe scrap prices will fall further although many suppliers are seeking to communicate bearish sentiment in order to secure lower dockside prices and many mills are trying to expand their scrap-rebar margins.

Strong supply from short-sea exporters and willingness from these sellers to drop prices is also helping to curb mills' short-term need for deep-sea cargoes and to expand their overall scrap-rebar margins.

In the middle of this week, a Marmara mill bought Romanian HMS 1/2 80:20 at $420/t cif, an Izmir mill bought Romanian HMS 1/2 80:20 at $426/t cif and a northern Turkey mill bought Romanian HMS 1/2 80:20 at $425/t along with some bonus material.

Higher quality Bulgarian scrap was offered at far higher prices. Romanian exporters confirmed many weeks ago that the quality of scrap inventory many of them are building at ports this year is not the same level as previous years. And several Romanian exporters are heard to have chartered vessels for loading over the next few days and were consequently under pressure to sell cargoes in the middle of this week.

The Argus daily HMS 1/2 80:20 (short-sea) cif Turkey steel scrap assessment decreased $12.50/t to $427.50/t on Thursday.

Turkish mills are looking to take advantage of the bearish scrap price sentiment to boost their scrap-rebar spreads above the highs of $240-250/t seen earlier this year.

Mills increased their local rebar offers on a USD-equivalent basis this morning in response to renewed restocking yesterday. An Izmir mill sold 20,000t today at $5/t higher than its sales price of 30,000t yesterday. A Marmara mill increased its offer by $20/t this morning to $710/t ex-works excluding VAT, and three other Marmara mills increased their offers by $10/t.

A further weakening of the lira against the US dollar encouraged more buying today. President Erdogan announced that the Central Bank is likely to decrease interest rates soon, two mills said. The domestic rebar sales will prompt several Turkish mills to cover those sales with deep-sea scrap purchases this week.

An Iskenderun mill was heard to sell billet domestically at $660/t ex-works excluding VAT today, and another Iskenderun mill was heard to offer $675-680/t fob. The mills' order books and these record-high scrap-billet and scrap-rebar margins would normally indicate that they are unlikely to make further significant efforts importers to push scrap prices down further in the immediate term.

But demand and prices for rebar and billet currently appear to be strong regardless of scrap price movement, which may mean that mills' usual concern that buying scrap at lower prices would impact steel sales is not a major factor in the current market.

Chinese domestic steel prices are expected to remain volatile but in a narrow price range in the short-term while the market is influenced by the supply fundamentals of steel output cuts. China Iron and Steel Association (CISA) member mills reduced crude steel output in late July below July 2020 levels because of the new policies to flatten second-half year output and lower steel demand, it was announced today.

Chinese market participants expect higher domestic steel demand to return in early September. Going on early indications for strong price expectations in the US, Europe and Russia for September, Turkish mills will likely aim to be ahead of that demand curve and could lead a scrap price recovery in the second half of August if scrap supply becomes less available and scrap exporters pull back from the market.