The positive mood observed at the end of last week disappeared quickly at the start of the new week due to the escalating military conflict between Israel and Iran. The war in the Middle East had a negative impact on Turkey’s steel and scrap markets, curbing the upward expectations for scrap prices. Turkey still needs scrap unless Turkish mills decide to cut capacity utilization rates and there are several factors that can cause prices to move up, including potential disruptions in the Suez Canal. However, sales by Turkish mills have slowed down once again, and market players have become very cautious.
Yesterday, 17 June, Turkey has bought an ex-Finland cargo to be shipped to Izmir. The cargo consists of HMS I/II 80:20 scrap at $340/mt CFR, shredded scrap at $360/mt CFR and bonus grade scrap at $360/mt CFR. This price is $1.5/mt higher than SteelOrbis’ reference prices for ex-Baltic HMS I/II 80:20 scrap. While there were rumors of an ex-Denmark booking closed at $339/mt CFR Turkey earlier this week, the information circulating the market was wrong and had no impact on SteelOrbis’ reference prices. As of today, ex-Baltic HMS I/II 80:20 scrap quotations have been revised directly to $340/mt CFR directly.
Accordingly, SteelOrbis’ ex-EU scrap prices will remain at $336.5/mt CFR. The rumor of an ex-UK booking circulating in the market yesterday was denied by the parties and had no impact on SteelOrbis’ reference prices.
It can be observed that scrap suppliers are eager to increase their offer prices to Turkey. Their reasoning is the increased local prices in their domestic markets, higher sea freight, euro-dollar exchange rate, Turkey’s need of scrap to be shipped in July. With the collection prices in the European scrap export yards being in the range of €250-255/mt DAP, SteelOrbis hears that the flow to export yards is still slow. The same is heard on the US segment, where local scrap prices are more attractive than the export yards’ quotations and flow is more towards the local market. It shall also be reminded that as of today, June 18, Turkey has bought very little scrap to be shipped in July. In a normal day, this tight schedule would cause prices to move up further. Yesterday, European cargoes were offered at $345/mt CFR, while ex-US cargoes or ex-Scandinavian cargoes were offered at $350/mt CFR, obviously with a negotiation margin. The ex-Finland cargo mentioned above was closed significantly lower than this level. Another note for the positive factors is the low supply of shredded scrap. Market sources report that the price for shredded scrap is more attractive in the EU market and Turkey may be forced to accept higher levels for this grade in the coming deals.
On the other side, Turkish mills are very cautious. Their rebar sales are very slow. The small recovery seen in the local rebar market at the end of last week has disappeared. Also, Yemen market, their biggest rebar buyer is out of the market. “Even if they needed the material, the shipment to their region will be hard in the coming days. Insurance costs are increasing for that route,” a source from a major Turkish mill commented. Also, sources mention that the military existence in the region may cause disruptions in Turkey’s import billet shipments. “We have seen it before. We are not sure of our purchases or our sales that need to be shipped through the canal can go through right now. We need to wait and see,” another source said. Some sources from the Turkish mills started voice a possible cut in their capacity utilization rate. “We wanted to finish this year without any losses. It was already not our best year. Now we are not even sure if we can maintain our capacities,” a third source commented.