Although Brazilian miner Vale’s announcement of new iron ore production cuts totaling 12.8 million metric tons has raised expectations of possible increases in steel prices and particularly in iron ore prices in the international markets, no very significant development has been observed yet. Following the announcement made on March 15, iron ore prices increased by $1.74/mt yesterday, March 18, and have almost remained stable today.
It is observed that scrap demand in Turkey - the world’s biggest scrap importer - has made a quiet start to the current week, especially for deep sea scrap. SteelOrbis has been informed that deep sea HMS I/II 80:20 scrap offers to Turkey are now above the level of $325/mt CFR, but Turkish mills are showing little interest in these offers. Short sea scrap demand in Turkey is observed to be slightly stronger than Turkish demand for deep sea scrap, while it is noteworthy that bookings concluded yesterday and today from Romania, Bulgaria and Adriatic were transacted at $311-314/mt CFR.
Although it is believed that Turkish steelmakers’ scrap purchases for April shipments are still incomplete, it is heard that some mills have cut further their production rates. Against the backdrop of weak rebar demand from both their domestic and export markets, Turkish steel producers are observed to be accelerating their short sea and domestic scrap demand as they plan to meet their needs cautiously instead of suffering a further decrease in their profit margins by accepting higher deep sea scrap quotations in the current market circumstances. Accordingly, the Turkish mills prefer to delay their deep sea scrap purchases in the meantime. Despite the weakness of demand, Turkish mills have increased their domestic finished steel prices today influenced by the rises recorded in iron ore quotations, and are testing the market with new offers.
Right after Vale’s announcement of new production cuts, the initial reactions in terms of ore prices were observed to be limited. The shortfall in the company’s annual iron ore production has reached 63.8 million tons with this new cut and this situation may cause iron ore prices to maintain their current high levels, though no new sharp rise is considered to be likely in the global iron ore market. In the scrap market, supply is expected to increase as seasonal factors will facilitate collection activities. This, taken together with Turkish mills’ cautious stance, is foreseen to put pressure on scrap prices. Meanwhile, higher deep sea scrap offers to Turkey are not expected to gain acceptance from buyers.