Although two weeks have now passed since the Turkish mills stopped their scrap purchases, they have not yet shown any inclination to return to the market to buy material; this may be explained principally by the lack of demand in the finished steel markets as well as the decreasing price trends in those markets.
Due to the weak scrap supply in the US domestic market and strong demand in the local market and from the Far East, US scrap prices have shown an increase at the beginning of July. It is heard that demand still continues to come from mills in the Far East. Meanwhile, against the offers given from the US at the level of $330/mt CFR, it is reported that the Far Eastern mills have accepted to pay around $325/mt CFR for ex-US scrap cargoes. On the other hand, it is seen that ex-US scrap offers, which have not indicated a decreasing trend in Turkey, are unlikely to gain acceptance in this country especially when compared current finished steel prices in the Turkish domestic market are taken into account. While the Turkish mills remain silent, at the same time US scrap suppliers are not in any rush to conclude sales.
A slightly different situation is observed on the European side. As we mentioned in our Italian scrap analysis dated July 13, finished steel demand in Italy is at low levels, though mills' intentions to raise their finished steel prices due to the approaching holidays have been reflected in scrap prices in the local market. Although both supply and demand levels are low in the scrap market, prices have shown a slight increase. Following the latest HMS I/II 70:30 scrap booking concluded from Europe to Turkey at $270/mt CFR, no offer has been heard below this level.
While ex-short sea HMS I/II 70:30 scrap offers given from Algeria, Israel and Lebanon are around the level of $250/mt CFR, it is heard that some low tonnage bookings have been concluded in the price range of $245-247/mt CFR. Turkish mills are giving counter bids below these levels; however, suppliers have yet to accept bids below $245/mt CFR.
Ex-Black Sea A3 grade scrap offers have been decreasing from the levels seen two weeks ago at $275/mt CFR Turkish ports. This week some A3 grade scrap offers given from Russia and Romania are heard to be at the levels of $255-260/mt CFR, though Turkish mills have not been inclined to show interest even in these reduced offers.
There are not so many options available to Turkish mills who find current scrap offers to be on the high side. Should they decide not to cut production, it is thought that they will likely say yes to scrap offers within a few weeks, accepting a certain margin between scrap costs and finished steel prices.