Turkish mill short-sea scrap preference to narrow premium

Posted on 15 January 2020

Source: Kallanish

Turkish mill demand for deep-sea scrap is almost dead, but there are a few producers inquiring about short-sea scrap.

Although both sellers and buyers are in need of concluding deals for February shipment, neither is in a rush.

Turkish mills are delaying their scrap purchases, hoping for a finished steel sales improvement. This is increasing pressure on suppliers, with some deep-sea merchants lowering their offers this week. A US scrap supplier that offered HMS 1/2 80:20 at $310/tonne cfr Turkey last week has dropped its offer to $300-302/t cfr this week.

Most suppliers, however, are advertising cargo availability without quoting specific offers, as they expect mills to push for further discounts whatever the price.

Turkish mills are unwilling to pay $300/t for scrap, since they cannot increase rebar prices amid low demand, and are therefore trying to pressure scrap prices down. As mills have difficulties in selling rebar at above $445/t fob Turkey, they are bidding for scrap at $285-290/t cfr, aiming to maintain scrap-rebar margin at above $160/t.

A Turkish mill tells Kallanish: “The market will be clearer in the second half of the current week. As rebar prices are on a downtrend, mills are increasing pressure on scrap prices and delaying their purchases, which is not the right thing to do at the moment for me.”

A scrap supplier says: “Mills’ February-shipment purchases are missing. As they continue to postpone their purchases, they will face higher prices upon returning to the market.”

“As well as buyers needing to procure, there are many deep-sea suppliers that need to sell,” says another scrap supplier. “As I don’t think that much will change in the rebar market, I am expecting to see lower scrap prices next week.”

A trader comments: “There is a downtrend globally. However, the whole market sentiment may change upon positive news from China and the USA tomorrow.”

Although there is a rumour of a European-origin scrap deal at $292/t cfr Turkey, it is yet to be confirmed.

Despite scarce short-sea supply, Turkish mills are expected to initially prefer short-sea scrap purchases, which have favourable shipment, payment and quantity terms. This is usually the case when the rebar market is underperforming. The regular $10/t margin between deep-sea and short-sea scrap prices may therefore contract in the near term. The latest short-sea scrap deals, excluding Russian-origin, were concluded at $289-291/t cfr Turkey. 

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