Following the political developments in Turkey which started on March 19, players in the Turkish steel and scrap markets are evaluating the economic impact of the recent events. As the new week began, an ex-US scrap deal from late last week was shared with the market and raised the question of a possible peak for prices. Most market players believe that deep sea scrap prices will now remain stable as players monitor the situation closely, still trying to make accurate forecasts as event move rapidly.
Last Friday, March 21, the ex-US scrap cargo in question was bought by a mill in the Izmir region. The cargo was for HMS I/II 85:15 scrap at $382/mt CFR, while it will be shipped in April. This price indicates approximately $380/mt CFR for the benchmark HM SI/II 80:20 scrap, market sources agree, merely $1/mt lower than the previous ex-US booking done from Iskenderun. As a result, despite the slight softening, deep sea scrap prices can be considered to be stable.
The collection prices of European export yards are still at €310/mt DAP, while in some rare cases reaching €315/mt DAP on the upper end. SteelOrbis agrees that the collection costs in the EU are not allowing much room for exporters. While bonus scrap collection prices at EU-based export yards are at €330/mt DAP, locally the price for this grade is now at €364/mt delivered, leading some German sub-collectors to wait before concluding sales to export yards to evaluate the alternatives. In the US domestic scrap market, initial expectations for the April buy-cycle are mostly negative. Market players expect a normalization in the US market, with a softening of prices considered to be a strong possibility when April scrap purchases start. However, since US scrap export prices have not followed the local market prices and have remained relatively conservative over the past month, the impact of a possible softening of local prices on ex-US HMS I/II 80:20 scrap prices is also not clear. SteelOrbis hears that scrap flow to export yards in the US was lower than usual in March amid the more attractive prices in the local market. Turkey is receiving billet offers from China at $480-483/mt CFR, with Vietnamese billet offered at around $486-490/mt CFR. These offers to Turkey are for June deliveries, and so many sources said they do not provide an alternative to scrap yet.
One of the main topics of the conversation in the market since the beginning of the week is the Turkish lira-US dollar exchange rate, which directly impacts trading. Yesterday, March 25, Turkey’s President Erdoğan stated after a cabinet meeting, “Our Ministry of Treasury and Finance, our Central Bank, and all relevant institutions are working in full coordination with a strong team spirit and our firm support, taking every necessary step - both already taken and ongoing.” On March 19, the Turkish lira lost approximately 12 percent of its value and momentarily depreciated to 42.0 against the US dollar. While the Turkish lira regained some strength on the same day, market sources believe the lira remains vulnerable under the current conditions. Today, March 25, the Turkish lira stands at 37.97 to the dollar. “It is impossible to make calculations regarding our sales prices or procurement prices. We are making sales on lira basis. Deferred payments will be hard to estimate. Additionally, commercial loan rates are now higher, causing additional costs for buyers,” a source at one mill said. Another source at another mill commented, “Since deep sea purchases for April shipments are almost completed, people can wait and see. There are several offers from the EU. They are not cutting down on their offers. Turkey is not showing a lot of appetite currently. Hence, we can say prices have hit a peak and they may stay in the current price range for a while.” A European scrap seller said the current week will be silent in terms of scrap trading, noting, “People would like to see their sales first. And it is already the week before the Ramadan holiday. I think trading may be postponed after the holiday. Traders are not doing their traditional restocking before the holiday this year.” Another market source said the sluggish start of the current week will continue, adding, “We may hear something at the end of the week, not that prices are falling but we now can see a hike is also unlikely.” As a result, SteelOrbis believes that deep sea scrap prices for Turkey have reached a peak and will likely move sideways in the coming round of bookings.