SteelOrbis

Orbis Turkish Scrap Forecaster – September 2016

 

 

 

What happened in the last 3 months?

June - August 2016 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 see steady decline in June

Having halted their deep sea scrap purchases between early May and the second week of June, Turkish mills then resumed their scrap bookings and showed strong demand for scrap up to the end of June. However, due to the plentiful volumes available from suppliers who had not been able to conclude scrap deals for a long while and also due to the competition among suppliers, scrap prices saw a steady decline in June.

  • Finished steel demand picks up slightly in June

In the second week of June, Turkish mills resumed their scrap purchases and scrap price levels gained clarity, causing finished steel buyers who had been postponing their purchases to recommence their bookings. However, this demand recovery was short-lived due to both the month of Ramadan and the summer holidays.

  • Scrap prices indicate sharp increase in mid-July

After declining in the first two weeks of July despite the purchases concluded by Turkish mills, scrap prices indicated a sharp increase in the middle of the month in line with rising Chinese billet offers, while they closed the month on a sideways trend.

  • Demand for Turkish finished steel still weak in domestic and export markets in July

Buyers of Turkish finished steel in the domestic and export markets, who had postponed their purchases during Ramadan, increased their price inquiries following the end-of-Ramadan holiday. However, the failed coup attempt on July 15 in Turkey caused buyers to stop their purchases immediately. In the export markets, purchases improved slightly, while no significant recovery was seen in demand. Accordingly, demand for Turkish finished steel remained weak in July.

  • Scrap prices soften in August

In August, scrap prices softened due to the oversupply problem resulting from weak scrap demand from Turkish steel producers throughout the month.

 

 

August: Forecast vs Actual Situation

Scrap HMS I/II 80:20 CFR Turkey

In the Orbis Turkish Scrap Forecaster for August 2016, we had predicted that Turkish mills, having concluded many scrap bookings in July and with their finished steel sales not expected to improve significantly, would likely show limited demand for scrap in August. We had also predicted that scrap prices would move on a soft trend throughout August based on the assumption that scrap supply would be stronger than scrap demand - even though no recovery was anticipated in scrap supply volumes due to the holiday season. In the given month, Turkish mills’ demand for scrap was limited as we expected and scrap prices indicated a slight decline because of the plentiful volumes available from suppliers, despite the rises in prices of billet and iron ore. Accordingly, as of the end of the month of August the deviation between our forecast and the actual price stands at 1.82 percent.

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

  • Turkish mills’ demand for scrap remains weak

Demand in the Turkish long steel market has continued to be sluggish for a long time now, with the result that buyers’ inventories have declined significantly. However, with the political and economic uncertainty in Turkey unlikely to be resolved in the near future, buyers are expected to continue to conclude purchases only in line with their needs.

  • US domestic scrap prices soften slightly

Despite the slowdown in scrap collection activities in the US, US domestic scrap prices declined slightly in August as scrap demand from US-based mills decreased due to their maintenance works and their efforts to manage their inventories, and also as weak export demand exerted downward pressure on scrap prices.

  • Scrap collection activities slow down in EU

In August, scrap collection activities slowed down in the EU, with demand in the region also weakening due to the summer holidays. In late August, EU-based scrap suppliers entered the market seeking to gain a share in the Turkish scrap market and several ex-EU scrap bookings were concluded in Turkey.

  • Ex-Baltic scrap supply to Turkey increases

In August, Turkish mills’ demand for scrap decreased, while Baltic region-based scrap suppliers’ inventory levels were quite high as they could not conclude sales because European buyers were on holiday. As a result, suppliers in the Baltic region increased their scrap supply to the Turkish market in the given month.

  • Black Sea scrap suppliers forced to reduce prices

Scrap suppliers in the Black Sea region were more flexible in terms of reducing their prices in order to conclude sales amid the weak demand from Turkish mills. Accordingly, in the month of August, a widening was observed in the gap between deep sea scrap prices and scrap prices from the Black Sea region.

  • Iron ore prices fluctuate on upward trend in August

In August, with the upticks in the Chinese futures market and rising domestic demand providing support for Chinese domestic semi-finished and finished steel prices, iron ore offers to China fluctuated on a slight uptrend. However, the overall increase in iron ore prices remained limited and slight downticks in prices were observed on some days during the month due to expectations of lower demand because of steel capacity cuts. Accordingly, global iron ore prices followed a fluctuating trend throughout the month.

  • Chinese billet prices indicate sharp increase

With the increases in the Chinese futures market in August being interpreted as indicating an improvement in China’s economic outlook, Chinese domestic billet demand improved and domestic billet prices increased. Meanwhile, the production cuts of 30-50 percent during the August 16-31 period announced by the Tangshan government caused domestic billet supply to contract. As a result of rising demand in the domestic market and contracting supply volumes, Chinese suppliers’ billet offer volumes to the global markets remained limited and ex-China billet prices increased by a total of $25/mt during the month of August.

  • Turkish mills prefer to use scrap in finished steel production

In August, Turkish steel producers continued to use scrap instead of billet in finished steel production due to its cost advantage, as a result of the slight downtrend in import scrap prices against the backdrop of the ongoing uptrend of Chinese billet offer prices and the unchanged levels of ex-CIS billet prices despite weak demand.

  • Demand fails to recover in local Turkish rebar market

Due to the ongoing political and economic uncertainty in Turkey following the coup attempt on July 15, and also amid terrorist attacks and cross-border military operations in the country, demand in the local Turkish rebar market remained weak in the month of August. Furthermore, domestic producers’ rebar inventory levels increased sharply since Turkish traders only concluded bookings in line with their sales volumes and did not build up their stocks.

  • Foreign buyers exert pressure on Turkish mills’ steel export prices

With demand for Turkish steel in the export markets remaining weak in August, foreign buyers continued to exert pressure on Turkish steel export prices. Turkish steel producers, who had increased their export prices on the back of the uptrend of import scrap prices in late July, revised their export prices in mid-August back to the price levels seen in July, since the higher prices had failed to gain acceptance in the target markets.

  • Traders’ rebar inventories in UAE increase

UAE-based traders’ rebar inventories increased sharply in August as a result of bookings concluded from local producers. Thus, UAE-based buyers’ purchases of Turkish rebar were very limited. With buyers in the UAE exerting strong pressure on Turkish rebar prices, Turkish producers decreased their rebar export offers to the UAE as they needed to increase their export sales given the sluggish demand in their domestic market.

  • US demand for Turkish rebar fails to improve

With inventories of import rebar at US ports still at high levels in August, purchases of Turkish rebar by US buyers remained limited despite the decreases seen in Turkish rebar offer prices to this destination. Accordingly, US demand for Turkish rebar remained at weak levels throughout August.

  • Turkish producers’ rebar sales to Egypt decrease sharply

Amid the worsening in August of the long-standing problem of tightness of foreign exchange availability in Egypt, Egyptian buyers’ rebar import volumes from Turkey decreased sharply.

  • Turkish rebar mills continue sales of small tonnages to Syria and Iraq

In line with the sales seen in previous months, in August Turkish rebar producers, particularly those based in Turkey’s Iskenderun region, continued to sell small tonnages by truck to Syria and Iraq, despite the political tensions and conflict in these destinations.

 

 

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

  • Demand in local Turkish steel market expected to recover slightly

In Turkey, stockists’ inventories of semi-finished and finished steel are at very low levels since they have been postponing their bookings for a long time, concluding deals only to meet their immediate needs. Demand in the local Turkish rebar market is expected to recover slightly in the coming period as buyers are expected to increase their inventories by a slight margin after the Feast of Sacrifice holiday (September 12-15) and since demand is expected to be at higher levels approaching the last quarter as compared to the summer period.

  • Turkish rebar bookings in the UAE not foreseen to improve

At the end of August, the rebar inventories of local traders in the UAE remained at high levels. Also, demand in the local UAE rebar market is expected to be weak until after the Feast of Sacrifice holiday. As a result, Turkish producers’ rebar sales to the UAE are expected to remain limited in September.

  • Turkish rebar sales to US expected to pick up slightly

Demand for rebar in the US will likely recover slightly in September with the end of the sluggish summer period. However, rebar inventories at US ports are still on the high side entering the month of September. Although US buyers are expected to increase their rebar bookings slightly in the period after the Labor Day holiday (September 5), it is thought that this increase will be limited due to the high levels of inventories at US ports. Accordingly, Turkish producers’ rebar sales to the US are not expected to record a significant improvement.

  • Turkish producers’ rebar sales to Egypt to remain limited

The situation as regards the long-standing tightness of foreign exchange availability in Egypt deteriorated significantly in August and there is no sign of any solution to this problem as the month of September starts. As a result, rebar sales from Turkey to Egypt are expected to remain limited in the coming period.

Turkish mills to continue sales to Syria and Iraq by truck despite conflict

Turkish mills are expected to continue their sales to Syria and Iraq by truck despite the political tensions and conflict in these destinations as buyers’ demand for Turkish rebar in these countries does not depend on price levels and is expected to remain stable in the coming period.

  • Chinese billet export prices foreseen to maintain their strength

The production cuts at Chinese mills due to the International Horticultural Exposition in Tangshan will remain in force until October 16 and the production cuts at mills due to the G20 summit in Hangzhou will continue until September 6. Besides, the Chinese government has been enforcing occasional sudden production cuts at some mills within the scope of environmental protection measures, without giving prior notice. All these production cuts are causing supply problems in China. Meanwhile, in September steel demand in the Chinese domestic market is expected to be livelier than it was in July and August, supported by more favorable weather conditions. Accordingly, Chinese billet suppliers are expected to focus on their domestic market and to continue to limit their offer volumes to the export markets. In this context, Chinese billet export prices are foreseen to maintain their strength in the short term.  

  • Ex-CIS billet prices to remain under pressure

There are no signs that the political and economic uncertainty in Turkey and the ongoing tightness of foreign exchange availability in Egypt will be resolved in the short term. Accordingly, CIS-based billet suppliers, who have been struggling to conclude sales to their main export markets, are not expected to be able to resist downward price pressure from Turkish steel producers.

  • Turkey’s steel output not expected to increase

Although it is anticipated that steel demand in Turkey’s domestic and export markets will be at higher levels after the end of the summer season, Turkey’s crude steel production is not expected to increase, but will likely remain at current levels in the short term due to planned maintenance works at some steel mills during the Feast of Sacrifice holiday.

 

Assessment of raw material markets

  • Scrap collection activities expected to pick up

With the holiday season and hot weather coming to an end in the regions which supply scrap to Turkey, the disruptions seen in scrap collection during the summer period are no longer expected to be observed and the inflow to scrap yards is likely to accelerate, resulting in increased scrap supply.

  • US domestic scrap prices unlikely to decline         

Since slow scrap collection activities in the summer period further exacerbated the supply shortage in the US domestic scrap market, US scrap suppliers are now in fierce competition with each other in terms of sourcing scrap to meet the demand coming from the export markets and so they have increased their prices. In this context, US domestic scrap prices are unlikely to decline in the coming period.

  • Domestic scrap demand expected to improve in EU

With the holiday season coming to an end in Europe, EU-based steel mills are expected to resume their scrap purchases and their demand for scrap is likely to increase. As a result, EU domestic scrap prices are not expected to soften.

  • No slackening anticipated in Turkish mills’ demand for scrap

Scrap demand from Turkish mills, who expect a recovery in both in their domestic and export markets especially following the Feast of Sacrifice holiday (September 12-15), is unlikely to slacken since they do not plan any production cuts and as import billet prices are not attractive enough to ensure a cost advantage over scrap in finished steel production.

  • Scrap collection activities in Black Sea and Baltic regions expected to accelerate

In the Black Sea and Baltic regions, scrap collection activities are expected to accelerate in the coming period since scrap collectors are back from their holidays and also as they will seek to step up their collection activity ahead of the anticipated deterioration of weather conditions in the last quarter. As a result, scrap supply from these regions is expected to increase.

  • Iron ore prices unlikely to decline significantly in short term

Production cuts in China would normally herald a fall in global iron ore prices; however, iron ore prices in China are in particular being impacted considerably by the movements of the Chinese steel futures market. As a result, although production cuts are planned in the Chinese steel industry over the long term and this situation will exacerbate the oversupply problem in the iron ore market, iron ore prices are expected to continue their fluctuating trend in the near term, while the forecasts of analysts and investment banks for iron ore prices for 2016 are in the range of $40-60/mt CFR China.

 

 

More radical scenarios excluded in forecasts

Negative 

  • Sudden changes in foreign exchange rates

  • Possible new tax applications and increases in tax rates which would negatively impact global trade

  • Possible new antidumping cases

  • Changes in global economy due to political uncertainties

Positive

  • Acceleration of economic improvement in developed countries

  • Easing of political uncertainties in the Middle East region

 

 

What was the situation in recent years?

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

June - December 2014 HMS I/II 80:20 CFR Turkey Prices

June - December 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 - YTD HMS I/II 80:20 CFR Turkey Prices

 

 

Related news

Turkey’s scrap imports up 8.35 percent in H1

Monday, 15 August 2016 16:01:00 (GMT+2)   -   Istanbul

In June this year, Turkey's scrap import volume increased by 32.8 percent year on year to 1.94 million metric tons and was up 14.1 percent compared to the previous month, according to the data provided by the Turkish Statistical Institute (TUIK). The value of these imports totaled $504 million, up 26.8 percent year on year and rising by 30 percent compared to May.

In the January-June period of this year, Turkey's scrap imports increased by 8.35 percent to 9.18 million mt, while the value of these imports decreased by 20 percent to $1.97 billion, both compared to the same period of the previous year. 
 
In the first half of the current year, Turkey imported 1,896,372 mt of scrap from the US, up 7.76 percent year on year, with the US ranking as Turkey's leading scrap import source, ahead of Russia which supplied 1,430,997 mt in the given period, up 16.07 percent year on year.

IREPAS: Global long steel products market still in critical situation despite greater price stability

Friday, 05 August 2016 17:08:59 (GMT+2)   -   Istanbul

The global long steel products market is still in a critical situation as market activity has been pretty slow for a long time, according to the short-range outlook report issued by IREPAS, the global association of producers and exporters of long steel products. Demand in the market has softened but supply remains the same. Buyers have been receiving offer alternatives but they are not in a hurry to buy. As such, sizable purchases have not been observed over the past two months. Under these circumstances, suppliers are trying to keep prices stable. Low inventories and supply constraints in China are helping to sustain international prices. High raw material prices are also helping finished product quotations to remain firm. As we are around the logical bottom level of prices, the downward movement of prices has stopped, IREPAS said. This has removed the anticipation among buyers for a better price with each new day.

Export-dependent mills struggle to find new markets

With all the geopolitical developments happening globally in addition to the increase in protective measures, export-dependent mills are finding it very difficult to compete and to find new markets or to develop their business in existing markets. On the other hand, buyers are searching for new alternative sources as in the case of US importers buying from Asia and Peru.

Gap between EU and third country prices narrows

In the meantime, according to the IREPAS report, the gap between third country and EU price levels has narrowed. Turkish prices have moved up, while EU prices have weakened as there is very little activity due to the summer lull.

Firm prices in ferrous scrap market on back of stable demand

The IREPAS report pointed out that ferrous scrap pricing firmed during the month of July in line with stable demand. Pricing bottomed at a higher level this time around in the benchmark Turkish trade as compared to April this year. Scrap was a more favorable alternative as iron ore pricing firmed and held semi-finished steel at a premium. Risk premiums and financing costs were raised immediately after the failed coup in Turkey but trade was restored quickly.

Extra caution among market players: some good news from China

Everybody in the market is extra cautious on both sides, which holds the market from falling apart. Trade remedies are narrowing the Chinese playground which eventually will force them to slow down their dumping into markets. China has recently announced it has set aside more funds to tackle zombie steel capacity during 2016. Additional antidumping duties towards Chinese exports and capacity cuts have also contributed to improving the market prospects, IREPAS noted.

Competition still very strong and output remains the most critical market driver

The current market situation is unstable and competition is still very strong. Even though prices are managing to remain stable in some regions, output levels remain the most critical driver since demand fundamentals have not improved considerably. IREPAS warned that, if Western countries continue to produce more compared to the same period last year and if the decrease in China’s production rate remains way below the decrease in their domestic consumption, there is a strong possibility that the market to go back to square one. As such, the outlook is also unstable.

Onus now on China producers to reduce output

According to IREPAS, it becomes clearer that the world can handle 50 million metric tons of steel products exported by China per year. Therefore, if China cuts about 50-60 million metric tons of production which is more or less 6-7 percent of its total output, then the global market will be able to reach a stable state. The onus is now on the Chinese producers to reduce output as almost all others have already done.

CISA: Challenges face cuts of excess Chinese capacity in H2

Friday, 05 August 2016 15:07:05 (GMT+2)   -   Shanghai

According to a new report issued by the China Iron and Steel Association (CISA), in the first half of the current year domestic steel enterprises have overall recorded increased net profits or switched from previous losses to profits, providing support for the implementation of supply-side reforms and elimination of excess and outdated capacities over the second half of the year.

However, as indicated by the CISA, challenges still exist as regards cutting excess capacity of crude steel, while some production capacities have actually resumed activity or increased output in the first half of the year due to the rising trend of finished steel prices. The implementation of capacity cuts in the second half of this year will also face the issues of staff resettlement and settlement of debts against the background of financial constraints on domestic steel enterprises. In the first half of the current year, supply of credit from banks to domestic steel enterprises were strictly regulated amid restrictions on credit for enterprises with excess and outdated capacity. The CISA added that a lot of work still needed to be done.

Turkey’s finished steel output and consumption increase in H1

Monday, 01 August 2016 16:57:50 (GMT+2)   -   Istanbul

In the January-June period of this year, finished steel output in Turkey increased by three percent year on year to 18.89 million mt, according to the Turkish Iron and Steel Producers' Association (TCUD). 

As stated in the report, in the first six months of this year Turkey's long product output totaled 13.63 million mt, up 3.8 percent, and its flat product output grew by 0.9 percent to 5.26 million mt, both on year-on-year basis. Meanwhile, 72 percent of the total finished steel output consisted of long products and 28 percent was accounted for by flat products. 

Finished steel consumption in Turkey in the January-June period of this year rose by 6.3 percent year on year, slowing down compared to the growth rate in the January-May period, to 18 million mt.

In the first six months of the current year, consumption of long products in Turkey increased by 6.75 percent to 9.3 million mt, while flat product consumption rose by 5.9 percent to 8.7 million mt, both year on year. In the given period, 51.6 percent of total finished steel consumption was for long products, while 48.4 percent was accounted for by flat products.

UAE considers imposition of scrap export duty

Tuesday, 26 July 2016 14:54:10 (GMT+2)   -   Istanbul

The Ministry of Economy of the United Arab Emirates (UAE) is considering imposing an export tax of AED 250/mt ($68/mt) for scrap shipments, according to market sources.
 
UAE-based sources tell SteelOrbis that they believe the proposal for the scrap export duty will likely become official, though the implementation date is yet to be announced.
 
The products to be subject to the export duty are classified under Customs Tariff Statistics Position Numbers 72045000, 72044900, 72044100, 72043000, 72042900, 72042100 and 72041000.

Ukraine revises proposal to increase scrap export duty

Wednesday, 13 July 2016 14:24:42 (GMT+2)   -   Istanbul

The Ukrainian parliament (Verkhovna Rada) has approved to increase export duties on scrap from €10/mt to €30/mt for one year, and has also cancelled the export quotas for scrap, according to media sources. However, it is still subject to the approval of the President Poroshenko to become official. 

Earlier this year, Ukrainian president Petro Poroshenko vetoed the previous draft law to increase Ukraine’s export duty on scrap for three years, stating that that the duty is not in compliance with the provisions of the association agreement between Ukraine and the European Union ratified on September 16, 2014. The agreement obliges the parties not to introduce or maintain any duties, taxes or any other measures of equivalent actions that are imposed on the export of goods or imposed in connection with exportation of goods to another territory.

EUROFER: Brexit would further damage UK steel industry

Monday, 20 June 2016 17:05:16 (GMT+2)   -   Istanbul

The European Steel Association (EUROFER) has stated that the referendum on the UK’s membership of the European Union puts a historic decision in the hands of the British people. However, a vote for Brexit (British exit from the European Union) would represent another blow to the UK steel industry, its value chains and the wider economy, and would also have far reaching effects on the European steel sector.

According to EUROFER, in the event of a vote for Brexit, international businesses would reconsider their operational, commercial and investment strategies, which could have serious repercussions for the downstream client sectors of the UK steel industry. In addition, the resulting uncertainty, particularly during the negotiating period, could immobilize investment and compound currency volatility. Meanwhile, in the event of Brexit, the UK would have to find alternative arrangements for the conduct of its trade policy.

EUROFER director general Axel Eggert said that trade policy is much more effective as a bloc, adding that inside the EU the UK gets a better deal internationally than it could ever hope to achieve outside.

 

 


Print