Scrap more attractive than billet for Turkish importers

With CIS steel billet export prices rising more sharply than Turkish scrap import prices in January, billet imports have become economically unviable for Turkish importers.

Turkish steelmakers are focusing on buying scrap rather than billet, making steelmakers optimistic that demand for CIS billet and sold-out supply from that region will direct other overseas billet buyers' demand towards Turkish billet in the near future.

CIS billet export prices have risen from around $600/t fob Black Sea at the beginning of January to $625-630/t fob today amid increased north African demand.

The Argus HMS 1/2 80:20 cfr Turkey steel scrap assessment has risen by only $7.50/t in the same period — from $462.50/t cfr on 4 January to $470/t cfr today.

Increasing natural gas, electricity and salary costs in Turkey during the past four months have hiked conversion costs for steelmakers that produce rebar from scrap and billet.

Conversion costs for producing rebar from scrap now have risen to around $230/t from $150/t this time last year. Conversion costs for producing rebar from billet are at around $50/t, against $25-30/t this time last year.

Turkish rebar prices average around $700/t on a fob and ex-works basis. With premium HMS 1/2 80:20 prices averaging around $470/t cfr, Turkish steelmakers are on the brink of making losses.

But because CIS billet offers have now reached $675/t cfr Turkey, and conversion costs from billet to rebar stand at around $50/t, Turkish importers would incur considerable losses if they were to pay these billet prices today, relative to rebar at $700/t fob/ex-works. In fact, Turkish importers bid $645/t cfr for CIS billet just yesterday. They will not be able to source billet at that price, but it is the maximum level that is economically viable for importers.

Turkish steelmakers can also reduce their scrap costs by buying lower-priced short-sea scrap — strengthening their preference for imported scrap over imported billet.

By Alex Reynolds