It is observed that Turkish steel mills, who have been delaying their raw material purchases for a few weeks, returned to the raw material markets last week and concluded some scrap and pig iron bookings. Russian origin BPI (basic pig iron) offers which have been at the level of $255-260/mt FOB have not been accepted by steel mills, while some Turkish mills have concluded their BPI bookings of Ukrainian origin at the level of $250/mt C&F.
With the effects of the optimistic atmosphere provided by the private consumption tax applied by the government and recently announced stimulus packages, it is observed that foundries' order numbers have increased as compared to the first quarter and thus, their capacity utilization rates have risen as compared to the first months of the current year. Feeling the positive reflections of increasing consumption in white goods and automotive sectors, foundries which serve to these sectors have focused their attention whether the current discounts will continue or not.
As we look at the European market, difficulty observed on the demand side has continued to be seen in the western European countries in particular. For instance, in the German market a recovery is observed in the automotive sector with the help of the program that is conducted by the government. German traders, who consider that price levels show variances and some foundries will halt production within four weeks, are indecisive with regard to making purchases in the summer term. Russian origin BPI offers to this country are standing at the level of $260/mt FOB Black Sea ports, down by $10/mt as compared to last week, while Ukrainian origin BPI offers to the same country are $250/mt FOB.
It is also observed that buyers in the Asian market have been actively purchasing raw materials. It is seen that buyer countries, i.e. China and Vietnam, have been in the market in order to purchase scrap and BPI. China has concluded BPI bookings in particular from Japan at the levels of $300-305/mt C&F Chinese ports, even if for low tonnages. Meanwhile, it is heard that Russian producers have concluded BPI bookings to China again in the price range of $295-300/mt C&F. Chinese buyers' price idea for BPI purchases are at the level of $295/mt C&F China for high tonnages and for low tonnages it is at $300-305/mt C&F China. In the Indian domestic market BPI prices showed a downward correction over the last week. Also, at the same time, an Indian mill has opened a tender for export markets. However, in the tender in question, prices have not gained acceptance, since they are below the expected level of $300/mt FOB. Indian producers are having difficulties to find a price level to be accepted in the international markets.
As for the Brazilian market, since Brazilian real has been continuing to gain strength against US dollar, local mills have had problems to compete in the international markets. Brazilian mills who are still operating with 15 percent production capacity have intended to give offers minimum at $270/mt FOB southern and northern Brazil. However, traders' counter bids are standing at the level of $255/mt FOB, with no match to the mills' offers. Consequently, Brazilian mills have difficulties in terms of competing in the Asian markets which is one of the most important target markets of them.
Considering the possible demand contraction that will be seen in the European market in particular due to the summer holiday, pig iron mills will focus their attention on active markets and will try to compensate their outputs with demand coming from these active markets. On the other hand, in the coming weeks we will observe with interest whether the possible decreases will be seen in iron ore and other raw material costs will help producers to feel relieved somewhat.