SteelOrbis

Orbis Turkish Scrap Forecaster – January 2016

 

 

What happened in the last 3 months?

October-December 2015 HMS I/II 80:20 CFR Turkey Prices

 

Weekly price movements of different steel products and grades in major markets can be viewed comparatively in the SteelOrbis Historical Steel Prices section. Market trends can thus be seen more clearly, while desired charts can be created and used in reports or presentations.

All charts included in the Orbis Turkish Scrap Forecaster are for HMS I/II 80:20 CFR Turkey prices, while prices and charts for other scrap grades and regions can be found on our website.

 

Summary:

  • Scrap prices hit bottom levels in October

Due to the declines seen in scrap prices as of the middle of August, Turkish steel producers postponed their scrap bookings as long as possible and continued to push for further decreases in prices. In the middle of October, Turkish steelmakers’ target prices were at unsustainable levels particularly for suppliers in Europe and in the Baltic and Black Sea regions, causing the volume of offers to decline. Given the tightness of supply, the Turkish mills believed scrap prices had hit the bottom and so they stepped up their demand for scrap. Accordingly, scrap prices started to move up as of the middle of October.

  • Demand for finished steel in Turkey increases in October

With the US dollar losing strength against the Turkish lira, Turkish steel producers’ prices increased on dollar basis. At the same time, the rise seen in scrap prices as of the middle of October was reflected in finished steel prices, stimulating demand for domestic rebar, with Turkish producers’ demand for scrap thereby increasing.

  • Finished steel demand in local Turkish market comes to a halt in mid-November

The outcome of the November 1 general election positively impacted sentiment in the local Turkish market, resulting in a further increase in domestic demand for finished steel. However, the positive sentiment in the market was short-lived and demand for finished steel in the local market ground to a halt in the middle of November.

  • Turkish mills stop their import scrap purchases as of mid-November

Turkish steel producers stepped up their import scrap purchases amid the improvement in the finished steel markets, booking in excess of their needs and building up some stocks for the winter season. However, in mid-November Turkish producers stopped their scrap bookings and stayed away from the market until the end of the month due to factors including their own higher inventory levels, increased import scrap prices, the grinding to a halt of domestic demand for finished steel, and also due to the availability of import billet in the market at favorable prices.

  • Scrap prices decline in December

Since Turkish steel producers increased their import billet bookings during the month of December, their demand in the given month for import scrap for January shipment remained weak. Accordingly, in December, import scrap prices in Turkey decreased.

 

December: Forecast vs Actual Situation

 
Scrap HMS I/II 80:20 CFR Turkey

In the Orbis Turkish Scrap Forecaster for December 2015, we had stated that Turkish steel producers were not expecting any recovery in their finished steel sales to the domestic and export markets and that they would continue to purchase import billet, which remained more advantageous compared to scrap in terms of steel production costs. Accordingly, we had predicted that Turkish steel producers’ demand for scrap would not increase and that import scrap prices would for this reason move on a downward trend. Most of our predictions were realized and scrap prices did decrease in December. However, the decline margin was limited and smaller than we had forecast, mainly since scrap suppliers sought to resist the downward pressure on their prices, and this situation resulted in a deviation of 5.1 percent between our forecast and the actual price at the end of December.

The conditions which impacted the import scrap market in Turkey in December are as follows:

 

  • Weak demand for import scrap in Turkey throughout December

Turkish steel producers’ demand for import scrap, which had started to decline in mid-November, remained at weak levels throughout December as SteelOrbis had predicted. During the month in question, Turkish steel mills continued to book import billet, while they concluded a limited number of import scrap bookings in this period.

  • Domestic scrap prices increase in US

Domestic scrap prices in the US had been declining for a long time, while scrap collection activities in the country had slowed down significantly. Steel producers in the US were worried that scrap collection activities would decline further amid colder weather conditions and so in December they tried to avert this risk by raising their local scrap purchase prices for the first time in a long while.

  • European scrap suppliers reduce their prices

European scrap suppliers led the way in reducing import scrap prices for Turkey after Turkish steel mills’ demand for scrap imports had slowed down. In December, most import scrap purchases in Turkey were concluded from European suppliers, while prices of ex-Europe scrap cargos gradually declined throughout the month in question.

  • Ex-US scrap prices resist downward pressure for most of December

US scrap suppliers had not made any offers to the Turkish market and had maintained a strong stance on their prices during most of December due to the increases seen in local scrap prices. However, just before the Christmas holiday a supplier in the US reduced its prices significantly in deals concluded with two Turkish steel producers, decreasing its prices to the same levels as ex-Black Sea scrap prices, which came as a surprise to market players.

  • Prices in ex-Baltic deals show diverse trends

In the first two weeks of December, most import scrap bookings in Turkey were from the Baltic region, while price levels in these bookings indicated diverse trends. Market sources stated that the higher-priced ex-Baltic scrap deals failed to reflect the reality of the market. Late in December, following the decreases seen in ex-US scrap offers, suppliers in the Baltic region reduced their scrap offers to Turkey due to their concerns that prices might indicate even sharper falls.

  • Ex-Black Sea scrap prices decline

In December, Turkish steelmakers concluded just a few deals for small tonnages of scrap from the Black Sea region. Suppliers in Romania and Bulgaria preferred to focus on their local markets where prices were higher than in the export market, while Russian suppliers reduced their scrap export prices.

  • Iron ore prices switch to uptrend in third week of December

In December, crude steel production in China declined slightly (though this decline did little to redress the imbalance between supply and demand) due to mandatory shutdowns of steel producers amid air pollution in Beijing and due to production cuts by unprofitable Chinese steel mills. As a result, flat steel prices in China rose slightly at the beginning of the third week of December, providing support for iron ore prices to move on an upward trend in the following days. In addition, pressure on finished steel prices decreased following the decision of the US Federal Reserve to hike interest rates, and this also provided support for iron ore prices. Even though iron ore prices ended the month of December on an upward trend, this rising price movement was expected to be short-lived.

  • Chinese billet attracts interest in Turkey

Import scrap prices started to decline as of mid-November, with price levels in December remaining less attractive compared to prices of billet imports. As a result, Turkish steelmakers continued to purchase low-priced imported billet. However, billet suppliers in the CIS region focused on the Egyptian and Libyan markets where higher prices were accepted and so they did not adopt as aggressive a pricing strategy as Chinese billet suppliers in their offers to Turkey. Accordingly, Turkish steel mills mostly concluded billet purchases from China in December. In late December, Chinese billet suppliers attempted to increase their export prices by $5-10/mt, supported by the slight uptrend of iron ore prices. However, the new price range failed to gain acceptance in target markets.

  • Nursan Demir Celik halts production

Turkish billet and rebar producer Nursan Demir Celik, which had been operating in the Iskenderun region of Turkey since 1983, halted its production in December. The main reason for this decision was reported to be financial. The plant had an annual production capacity of 1.5 million mt. Following Nursan’s withdrawal from the market, tightness of availability surfaced in the region but was resolved within a short time without leading to an increase in the capacity utilization rates of Turkish steel producers.

  • Tight rebar supply in Turkey’s Iskenderun region

Demand for rebar in the local Turkish market remained weak throughout December. While prices declined at the beginning of the month, Nursan’s decision to halt production resulted in a sudden tightness of supply in Turkey’s Iskenderun region, causing rebar prices in the overall local Turkish rebar market to edge up. However, as of the third week of December, domestic rebar prices had started to move down once again due to the ongoing weakness of demand.

  • Turkish rebar producers continue to sell to Egypt in December

Turkish rebar producers continued to conclude sales to Egypt in December. Meanwhile, Egyptian buyers’ demand for Turkish rebar failed to improve in the same period, while problems with letters of credit continued to be observed in Egypt.

  • Turkish producers continue rebar sales to UAE in December

Although rumors of an imminent increase in import tax in the UAE in 2016 became more frequent, Turkish steel mills continued to conclude rebar sales to the UAE in December. At the beginning of December, UAE-based steel mills had increased their rebar prices for December production. However, with Turkish steelmakers almost achieving the same rebar export tonnages to the UAE in December as in November, UAE-based producers were obliged to reduce their rebar prices at the end of the month.

  • Demand for Turkish rebar remains weak in US

In December, demand for Turkish rebar in the US market remained at weak levels. In addition, rebar stock levels in the US were on the high side in the same period, while Turkish steel mills’ sales to the US were greatly limited due to fierce competition from aggressive Japanese rebar offers.

  • Gulf countries prefer prompt shipments

Due to speculation regarding a possible increase in import tax in the Gulf region in 2016, buyers in Gulf countries mostly preferred prompt shipments for their rebar purchases in December.

 

 

What is our expectation for the next 3 months?

 

Scrap HMS I/II 80:20 CFR Turkey

 

Assessment of semi-finished and finished steel market

  • Turkish domestic rebar prices likely to remain under downward pressure

Buyers in the Turkish domestic market, who sought to keep their rebar inventories at minimum levels and who thus postponed their purchases before the New Year, are expected to increase their rebar bookings after the New Year break. However, demand for rebar is likely to be limited and so prices will likely remain under downward pressure in the short term.

  • Purchases of Turkish rebar in UAE not expected to increase

Although demand for rebar is expected to remain firm in the UAE against the backdrop of major projects and preparations for Expo 2020 in Dubai, buyers are booking rebar only to meet their immediate needs, avoiding building up their stocks, while demand is unlikely to gain strength amid decreasing oil prices and price declines in the global steel market. As a result, Turkish producers do not expect to see any increase in their rebar sales volumes to the UAE.

  • No increase foreseen in Turkish producers’ rebar sales volumes to US

US-based buyers are expected to begin inquiries for rebar to meet their needs for the second quarter of 2016. However, Turkish producers’ rebar exports to the US are not expected to increase and deals for just small tonnages are foreseen to continue, since current rebar inventories are still on the high side in the US and competitive price offers are expected to continue to be made to the US from other markets which are struggling with oversupply.

  • Turkish mills to continue sales of small tonnages to conflict-stricken markets

In the Middle East, Syria and Iraq are still plagued by conflict. Even though Turkish steel producers are experiencing some problems in their trade with these countries, in order to ease the impact of oversupply they are expected to continue selling small tonnages by truck to these destinations, since they are facing fierce competition and weak demand in other export markets.

  • Turkish rebar sales volumes to Egypt not foreseen to increase

While rebar demand in Egypt increases occasionally, Turkish exporters are experiencing serious difficulties in selling to this destination due to ongoing problems with letters of credit. Even though the Central Bank of Egypt has taken some measures to ease the problem of foreign exchange availability, this problem still exists and no real resolution has been observed yet. Since suppliers find it difficult to export to Egypt, Turkish steel producers’ export volumes to the country are not expected to change much in the coming period.

  • Turkish mills to continue booking Chinese billet

In the short term, scrap is expected to remain less advantageous than billet in steel production. Chinese billet suppliers, who will be eager to achieve their new export sales goals in the New Year, are expected to meet Turkish buyers’ requests for discounts in the coming period, as they did in previous months, and to increase their sales volumes to Turkey. Meanwhile, the Chinese New Year holiday is not expected to impact trading activities in the markets, just like in 2015.

  • Ex-CIS billet prices likely to soften further

CIS-based billet suppliers, who are the most important competitors of China in the global billet market, are expected to continue to soften their prices in the coming period in order to keep their market share.

  • Possible tax rebate removal for chrome-added products not to impact Chinese exports

Rumors are increasing each day that the Chinese government may remove the export tax rebate on chrome-added products. In response, Chinese exporters are expected to use some new alloy material in the production process or take different measures - as they did when the export tax rebate on boron-added products was removed - in order to avoid any reduction in their steel export volumes.

  • Turkish mills' capacity utilization rates to continue to decline

Turkish mills are expected to continue to cut production and reduce their capacity utilization rates in the coming period amid factors including global oversupply, China’s competitive export sales strategy and ongoing economic problems in the local Turkish market.

 

Assessment of raw material markets

  • No decline anticipated in US domestic scrap prices

Although capacity utilization rates are still at 65 percent in the US domestic steel industry and as current inventory levels of finished steel importers in the US are still high, no decline is anticipated in US domestic scrap prices. The reason for this is that US steel producers do not want scrap prices to decline further as this might result in a slowdown of scrap flows with the worsening of winter weather conditions. Accordingly, US steel mills are expected to increase their scrap purchase prices slightly or at worst keep them stable.

  • Turkish mills likely to increase spot scrap demand

Having slowed down their scrap purchases in December, Turkish mills are expected to step up their scrap purchases again since their needs for scrap with January shipment increased entering 2016. However, the improvement in Turkish mills’ demand for scrap is anticipated to remain limited since they are expected to continue buying import billet and also because they are not planning any increase in their capacity utilization rates.

  • Ex-US scrap prices for Turkey expected to rise slightly

While many US scrap suppliers kept their offers to Turkey firm in December, one supplier reduced its offers for HMS I/II 80:20 to $185/mt towards the end of the month, though other suppliers were unable to reduce their offer prices to the same level. Many US suppliers are expected to maintain their resistance to downward pressure on prices in January as well and Turkish mills are expected to come under pressure to step up their purchases in January because of insufficient purchases in December. Accordingly, ex-US scrap prices for Turkey are foreseen to indicate a small increase in January as compared to December.

  • No shortage expected in EU scrap supply

No significant changes are expected in domestic scrap supply and demand in the EU in January, with both expected to continue to trend at medium levels. Turkish mills’ spot scrap demand is expected to increase, while EU-based suppliers, who do not have any inventory problems having been unable to conclude sales to the Turkish market in December, will likely meet Turkish mills’ price expectation. Ex-EU scrap prices are forecast to generally follow a stable trend, although they may fluctuate slightly.

  • Ex-Black Sea scrap prices to remain at current levels

With Turkish steel mills’ needs for scrap with January shipment expected to rise at the start of January, their demand for scrap from Black Sea suppliers, who are able to respond to prompt shipment requests more easily than other suppliers, is also expected to increase. However, this demand will only be met after the holidays since many Black Sea suppliers are away from the market in the first week of January. With this increase in demand from Turkey, suppliers in the Black Sea region will likely try to increase their prices. Nevertheless, ex-Black Sea scrap prices are instead expected to move sideways since Turkish mills will not accept any price increase given the current market conditions.

  • Iron ore prices forecast to decline

The increase in iron ore prices seen in December is likely to be short-lived and prices are expected to decrease in January due to factors including the ongoing high levels of iron ore supplies, declining liquid steel production in China amid winter weather conditions, the approach of the Chinese New Year, and the slowdown of Chinese steel consumption. Additionally, in December, Goldman Sachs announced another iron ore price forecast, predicting iron ore prices of $38/mt for 2016 and $35/mt for 2017 and 2018.

  • Turkish mills expected to continue capacity utilization cuts

Since there are no bright spots in the export markets and as demand is expected to be insufficient in the domestic market, Turkish steel producers are expected to continue to reduce their capacity utilization rates.

 

More radical scenarios excluded in forecasts

Negative 

  • Sudden changes in foreign exchange rates
  • Increased fears of global economic slowdown because of developments in China
  • Possible new tax applications and increases in tax rates which would negatively impact global trade
  • Possible new antidumping cases
  • Changes in Turkish and global economy due to political uncertainties
  • Effects of the political crisis between Russia and Turkey

Positive

  • Acceleration of economic improvements in developed countries
  • Easing of political uncertainties in the Middle East

 

What was the situation in recent years?

 

October 2012 - April 2013 HMS I/II 80:20 CFR Turkey Prices

 

October 2013 - April 2014 HMS I/II 80:20 CFR Turkey Prices

  

 
October 2014 - April 2015 HMS I/II 80:20 CFR Turkey Price   
 
2005-2009 HMS I/II 80:20 CFR Turkey Prices

 

2009-2013 HMS I/II 80:20 CFR Turkey Prices

 

2013 - Latest HMS I/II 80:20 CFR Turkey Prices

 

Related news

 

Tension between Russia and Turkey likely to further pressure steel prices

Friday, 11 December 2015 17:57:47 (GMT+2)   -   Istanbul

The political tension between Russia and Turkey, following the shooting down of a Russian warplane by a Turkish fighter jet on November 24, is likely to put pressure on the global steel market, further depressing prices, the Bangkok Post has reported, citing the ASEAN Iron and Steel Council (AISC).

 According to the Bangkok Post, AISC chairman Wikrom Wajracupta said the political conflict between the two countries could lead to a series of trade bans, potentially leaving a steel surplus to weigh on the market.

 “Russia was a big exporter of steel slab, while Turkey was a leading importer to feed its domestic steel industry. With a trade ban, Russia would have to export its steel to other countries to offset the loss of Turkish business, adding pressure to a global steel market already reeling from excess Chinese supply,” Wajracupta stated.

Turkish steelmaker Nursan halts production

Tuesday, 15 December 2015 18:09:19 (GMT+2)   -   Istanbul

Turkish steelmaker Nursan Demir Çelik Fabrikaları, which was founded in 1983 in the southern Turkish city of Hatay, has recently halted operations due to financial problems, according to media reports.

The steel mill with an annual capacity of 1.5 million mt and 900 employees used to produce 8-32 mm rebar and 120 x 120 mm-150 x 150 mm square billets. Nursan exported to 47 different countries and ranked 76th in Istanbul Chamber of Industry’s “Top 500” list and 123rd in the  Turkish Exporters’ Assembly “Top 100 Exporters” list.

Veysel Yayan:China should adjust capacity in line with own consumption

Friday, 20 November 2015 01:08:59 (GMT+2)   -   Istanbul

During the "New Horizons in Global Steel Markets" 10th Annual Conference organized by SteelOrbis in Istanbul on November 19, Dr. Veysel Yayan, general secretary of the Turkish Steel Producers Association, said that Turkey is expected to close 2015 with an annual crude steel output of 32 million mt, down 11 percent compared to 2012. The 17-15 percent growth trend in Turkey’s crude steel output ended in 2012. In the first 10 months of the current year, Turkey’s crude steel output decreased by seven percent compared to the same period last year.

Dr. Yayan stated that in the January-October period of the current year, while Turkey’s crude steel output decreased by seven percent, its finished steel output increased by three percent because of the significant rise in billet and slab imports. In 2015, the capacity utilization rate in the Turkish steel industry has declined to the unsustainable level of 44 percent, he said.

On the other hand, Turkey’s steel consumption increased by 12.4 percent in the first nine months of the current year, and this growth is expected to continue thanks to some projects, which were surrounded by uncertainty before the elections, but which are now expected to accelerate under the new government. The Turkish Steel Producers Association general secretary stated that the increased consumption is also expected to affect steel production and so the outlook for the domestic steel industry for 2016 is positive.

According to the 2014 figures, Turkey's steel exports dropped to eighth place from seventh place in the world rankings, and in 2015 they are expected to decline further. On the other hand, in 2014 Turkey’s steel imports rose to seventh place from ninth place in the world rankings. Turkey’s steel imports are expected to reach 19 million mt in 2015, with Turkey thereby expected to rise to fourth or fifth place.

Commenting on the increase in Turkey’s steel imports from China, Dr. Yayan said that the annual import volume had been 500,000 mt in recent years, whereas in the first nine months of the current year it increased to 2 million mt, while for the full year it is expected to reach 3 million mt despite the softening seen in August and September.

Dr. Yayan warned that the problems caused by China will also affect other sectors and that, accordingly, no one should remain silent as regards China. He ended his words by saying that China should adjust its capacity in line with its own consumption, adding that it should not harm other countries in order to sustain its own industry.

Turkey’s steel imports from China up 220.5% in January-August

Thursday, 01 October 2015 16:13:40 (GMT+2)   -   Istanbul

In the January-August period this year, Turkey's steel imports from China increased by 220.5 percent to 1.51 million mt, with a value of $1,24 billion, up 58.5 percent, both compared to the same period of 2014, according to the data released by the Turkish Iron and Steel Producers' Association (TCUD).

 According to the TCUD, in the first eight months of this year Turkey's overall billet imports from China totaled more than 526,000 mt compared to 20,000 mt in the same period of last year, while there were hardly any slab imports from China in the given period. As regards Turkey's other steel imports from China in the January- August period this year, Turkey's flat steel imports reached 589,000 mt, up 285.4 percent, long steel imports amounted to 132,000 mt, up 66.6 percent and steel pipe imports increased by 34.6 percent to 167,000 mt, year on year.

 In the January-August period, the share of imports from China in Turkey's total steel product imports rose from 5.3 percent in the same period last year to 12.1 percent.

In August alone, Turkey's steel imports from China reached 444,000 million mt, up 298.4 percent year on year. In the month in question, flat steel imports from China increased by 31.2 percent to 26,000 mt, long steel imports totaled 16,000 mt, down 39.6 percent, and pipe imports from China reached 18,000 mt, down 43.6 percent, all year on year

 

 


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