With the Turkish scrap market almost coming to a standstill, it is observed that a huge gap has opened up between the price levels of scrap suppliers and the price ideas of buyers, with the latter levels closely linked to the situation in the steel market.
Turkish producers, in order to achieve the best price levels, are trying to delay their scrap purchase activities as much as possible in the context of the current troubled global market situation. Taking finished product sales price levels and production costs into consideration, the producers' buying price idea is in the range of $215-220/mt CFR Turkey for ex-US HMS I/II 80:20 scrap. However, looking at the suppliers' own costs, it is observed that they are having difficulties in getting anywhere close to the levels in question. Since scrap demand is still coming from Far East-based producers and since these producers have accepted the price level of $290/mt CFR, US suppliers prefer to sell to this region.
Following the latest ex-Europe HMS I/II 70:30 scrap deal concluded in the last week at the price level of $218/mt CFR Turkish ports, no lower price level for scrap has yet been heard. However, we believe that the downtrend in the €/US$ exchange rate will have a knock-on effect on ex-Europe scrap offers, because European producers have only been showing small interest in scrap due to their heavily reduced production.
Meanwhile, ex-Russia A3 scrap is observed to be out of the game due to its high price level. With only a few deals for ex-Romania materials heard, it is reported that there are some ex-Romania A3 scrap offers at price levels of $230-235/mt CFR Turkey.
Although Turkish producers' scrap stocks are at low levels, we believe that the weakness in demand will continue given that producers have reduced their production significantly and as the overall finished steel products market still fails to offer hope.