Rising costs increase Turkish mills’ scrap price pressure

Posted on 03 November 2021

Turkish mills’ demand for scrap purchases has cooled following the sharp rise in industrial natural gas prices on Monday.

Scrap prices, on the other hand, have continued to soften on a fresh deal, as well as in offers. A US supplier, who was offering HMS 1&2 80:20 at $498/tonne cfr for Puerto Rico-origin material, is heard to have sold at $494/t cfr Turkey, with shredded at $514/t cfr.

“The quality of this cargo is closer to European cargoes. We should not consider this as a US scrap price,” says a mill who thinks US scrap prices should be closer to $500/t cfr.

Although there are not many offers in the market amid Turkey’s silence, suppliers have decreased their price targets. They were aiming to sell at $510/t cfr last week but on Tuesday seemed ready to sell at $500/t cfr.

A US supplier tells Kallanish: “Although Turkey’s demand level will be determining the trend, I don’t think any mill will accept a price at above $500/t cfr for premium HMS 1&2 80:20 today.”

Another supplier, who agrees, adds: “The sharp [gas price] increase by 48% was not expected. And there is more to come. While rebar demand is poor and prices are falling, costs are rising. This is putting mills’ margins at risk and will cause mills to exert stronger pressure on scrap prices. I am foreseeing a downward trend in scrap prices.”

“We have already experienced there is no rebar market that can absorb higher prices,” says a Turkish mill source. “Besides, sentiment is bearish in China. This will most probably result in more pressure on scrap prices or further production cuts. Domestic demand supported price increases recently. But we are approaching winter and under current economic conditions I have no trust in domestic demand.”

Another producer says the 48% gas price increase results in roughly $5/t higher rolling cost. “We will most probably see further increases in both natural gas and power prices,” he adds.

Short-sea scrap offers decreased by $5/t from last week to $485-490/t cfr from Ukraine and $480/t cfr from the Adriatic. Following sharp rises in previous weeks, scrap prices in Turkey’s domestic market have also started falling this week.

Dock prices in the Netherlands, meanwhile, have dropped by €10/t from last week to €350-355/t ($405-411) delivered.

Although most market participants are expecting a softening in prices, a drastic fall does not seem likely in the near term due to Turkey’s need for December-shipment cargoes and approaching holidays in supplier countries.

Costlier energy, meanwhile, is expected to direct Turkish mills’ demand towards higher-quality scrap.

Source : Kallanish