Scrap supply shock limits Turkish availability

Global ferrous scrap availability has diminished to such an extent amid supply shutdowns caused by the coronavirus outbreak that Turkish mills are now finding it increasingly difficult to source new cargoes, limiting their ability to drive prices down further.

Turkish mill bids were at around $207/t cfr Turkey for premium HMS 1/2 80:20 today, the level of a Scandinavian deal concluded at the end of last week, but no supplier was understood to be willing to accept this level.

Prices across the ferrous complex fell throughout March as the spread of the coronavirus dramatically weakened global steel consumption.

The scale of the fall in the Turkish ferrous scrap import price was exacerbated by an overhang of April shipment availability, coupled with only a gradual slowdown in scrap collection rates throughout the first half of March in particular. Consequently, the Turkish market was heavily oversupplied even as demand dropped off sharply.

The speed of the decrease intensified over the second half of March as some smaller exporters looked for cash while larger exporters sold off most of their stock.

This saw the Argus daily HMS 1/2 80:20 cfr Turkey steel scrap assessment decrease from $275/t cfr on 2 March to $205/t cfr on 27 March before edging up yesterday to $206.60/t cfr on two deals done on 27 March.

The slowdown in flows of both obsolete and industrial scrap to exporters throughout the past month as a result of lockdown measures to restrict the coronavirus is now creating a supply shock that is forcing mills to bid higher this week despite the fall in their own scrap requirement.

The majority of the scrap exporters still holding tonnages that were purchased at the beginning of March are cash-rich and can hold on longer to sell new cargoes.

Several of the exporters holding onto tonnages said that because availability had become so thin at today's price levels, a $5/t increase in Turkish bids today would not swing sales appetite for some of them.

The slowdown in scrap availability was emphasised late last week by global exporter EMR's announcement that it would close two-thirds of its UK yards from the end of 27 March.

Many deep-sea exporters have confirmed in the past two weeks that they have halted purchases of scrap from third parties or peddlers.

Some smaller scrap exporting countries such as Lebanon are also closing down exports of materials, including scrap metal. Lebanon's customers, such as Egypt and Greece, may need to turn back for more tonnages to other suppliers like the UK.

By Alex Reynolds